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At its meeting today, the Board decided to leave the cash rate unchanged at 4.75%.
Glenn Stephens the RBA Governor recently said
"The Australian financial system had continued to perform significantly better than most others in the developed world, consistent with high balance-sheet quality and the relatively strong domestic economy."
What does this mean for the property market?
First home activity has slowed across Australia, that reduced activity has a flow on effect, slowing demand across all price ranges.
However investors are now taking advantage of bargains that are being created by this low demand and are re-entering the market place.
This reluctance for first home buyers to purchase is leading to an increased demand for rental housing as they still need to have somewhere to live.
This has put upward pressure on rents along with falling vacancy rates in most areas.
This increase in rents has meant that the actual outlay by investors (the difference between mortgage payments and the rent received) is relatively low increasing the attractiveness of real estate as a viable investment option.
The predictions are for Queensland and Western Australia to lead the way in the economic recovery with the demand for Australian natural resources to be a long term demand rather than a short lived boom.
Interest Rates
Residential building starts will increase by 5% to 171,000 during 2011-12 as economic growth and recovery efforts in Queensland help sustain the building industry, new BIS Shrapnel report forecasts. Growth will be concentrated in resource-rich states, BIS says, with Western Australia expected to see a 6% rise in overall building commencements during 2011-12 to a total of $10.9 billion. Angie Zigomanis, senior manager of building and construction at BIS Shrapnel, says the report shows the effect of the First Home Owner's Grant in 2009, which brought forward purchases, is now starting to subside."It does seem optimistic for a forecast, but we've seen quite subdued activity in the housing commitments area."
Australian banks lending policies are largely controlled by well established legislative lending policies, which ensure that they do not rely on one segment of the market but that they spread their lending risk across many market segments, thereby avoiding being overly exposed should one segment of the market collapse as has happened in the USA.
Housing loans are also heavily scrutinised by Mortgage Insurers. Like any insurer they do not take unnecessary risks. This has ensued that our banks are still in a strong position and have survived the GFC intact. As a result, investors can have far more certainty in the economic future being relatively stable.
Glenn Stephens the RBA Governor also said recently
"We are now engaged in a national discussion about how to stretch the benefits of the resources boom over a long period, and how to manage the risks that it will bring. These are complex matters that involve a wide range of policy areas – macroeconomic, microeconomic, taxation, industrial and so on. But if that discussion can be conducted in a mature fashion, and followed up with sensible policies, then we have a good chance of leaving to the next generation a wealthier, more secure and more stable Australian economy."
By Rod White (YONG Corporate Chief Operations Officer) and his contact number is 0011 07 3373 9889
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