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Investor Report June 2015

By Ian Campbell

Market Update

Sydney’s soaring home prices are rarely out of the headlines these days. Recently Glenn Stevens raised eyebrows when he dubbed the city’s runaway prices as “crazy”.

It wasn’t that many disagreed with what the Reserve Bank Governor said, but rather that he said anything at all. It’s unusual for someone in his position to be so frank, suggesting the situation must indeed be extreme for him to speak so candidly.

Perhaps even more resounding was the response to comments by Treasurer Joe Hockey’s that first home buyers simply need to find a good job that pays good money to buy a home in Sydney.

Whatever your view of his comments, the reality is home prices in Sydney have risen by a staggering 39% over the last three years. The question now is can such an enormous price hike be sustained?

The experts seem to be divided on the answer. In a recent Sydney Morning Herald article, the Organisation for Economic Cooperation and Development said Australian house prices are at risk of a “sharp correction”.

UNSW’s Dr Nigel Stapledon – who specialises in real estate research and teaching – predicts the Sydney boom will be over by Christmas. He recently told Domain a rush of new apartments will cause a softening in prices.

But Domain Group Senior Economist Dr Andrew Wilson believes three price correction triggers – a cash rate of 6%, an unemployment rate of more than 10% and an Australian dollar below US50c – are all unlikely in the near future.

Interest Rate Update  

It’s hard to believe interest rates can go any lower, but Domain Group senior economist Andrew Wilson expects there will be two more cuts this year, saying that if economic conditions don’t improve, the Reserve Bank will have no choice.

According to a Sydney Morning Herald article, AMP’s Shane Oliver believes the next rate cut could come as early as next month due to weak capital expenditure. But 1300HomeLoans Managing Director John Kolenda thinks the RBA will leave rates on hold for now while two thirds of panellists surveyed by believe rates will go up sometime in 2016.

Don’t Fall for Spring Fever –Sell in Winter!

While many think spring is the perfect time to sell, the reality is there has never been a better time than right now in the middle of winter to achieve an outstanding price for your property.

Winning factors include interest rates at historic lows, a huge pool of potential buyers, record recent sale prices and a lack of stock due to winter.  So call our helpful sales team now on 9331 9600.

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