C&G on December’s RBA Announcement

Market Updates

It’s the fourth month in a row that the RBA has left the official cash rate on hold at 2.5%, the lowest it has been in 60 years. As it stands, by the time the RBA meet again in February 2014, the cash rate will have been on hold for six months.  Here at Chisholm & Gamon we certainly believe now is the time to invest. With the lowest interest rates on offer in decades, why wouldn’t you make your money work that bit harder for you?


RBA Governor Glenn Stevens has advised buyers in hot markets like Sydney to “take due care” with investments, and that their decision to buy be “based on sensible assumptions about future returns”.  RP Data figures released recently show the market has been moderating with an increase in capital city dwellings by 0.1% in November – this is after a 1.2% growth in October in Melbourne.  

 

Australian Property Monitors Dr. Andrew Wilson has admitted property prices are starting to moderate.  ‘‘Historically housing markets perform best when interest rates are stable,’’ he said. Further figures released by the Australian Bureau of Statistics show GDP grew 0.7% in the September quarter.  This economic growth displays signs of rebalancing away from a market that was heavily driven by mining and resource investment. 

HSBC chief economist Paul Bloxham states that "low interest rates are lifting the established housing market and this month brought more evidence that the upswing in residential construction is picking up pace". Despite slowing down, mining investment has not yet fallen away sharply and it has leveled out which is allowing more time for growth to rebalance."

Along with leaving the cash rate as is, global financial conditions remain accommodating.  There has been a decline in volatility in financial markets and there is ample funding available for creditworthy borrowers. Positive cash flow into the economy and good capital growth is vital for any investor, so it is important you choose your locality wisely.  The current climate presents great opportunities for investors to buy well, because interest rates are so low and rents are strong in many locations.  

Naturally, the full effect of decisions made by the RBA over the past year is still eventuating.  Borrowing in general has remained subdued.  There have been clear signs of increased demand for finance by households.  Both housing and equity markets have gained strength over recent times and this trend is being supported by investment. 

Looking for advice on an investment you are thinking of making late 2013 or early in the New Year? Chisholm & Gamon can assist you.