The Reserve Bank of Australia Board meets today to decide the fate of homeowners mortgage rates, and whether to raise interest rates, or to leave them alone.
RBA to leave rates as is?
Our tip is that homeowners and home buyers are safe. The RBA will not raise the official cash rate till the picture of the Australian and World Economies becomes clearer.
Sudden collapse of key indicators for the Australian Real Estate and economy.
The Australian economy was travelling smoothly upward just a couple of months ago.
Since then job ads and full time job vacancies have headed south and the Queensland economy figures are in, with the QLD flood damage and loss of mining, tourism and agriculture revenues caused by the floods is dragging Australia’s figures down.
Retailing is cactus
Retail sales are soft as people have stopped spending like there was no tomorrow, and small retailers are hurting. In Queensland many flood damaged shopping centres are not being refurbished and many traders are not returning. This means the ones that have returned are not getting the sales they once would as even anchor tenants are reluctant to reopen.
Real Estate sales torpedoed
Home sales, both established homes and new home contract sales have hit the skids in the real estate housing markets around Australia. As an example I live on a “dress circle” street in Northern Gold Coast area, and sales that once happened in days or weeks in my street are now failing to close in 3 months.
The local real estate agent tells me that home prices are down 10 per cent in the area on what they were 12 months ago.
This real estate slump spills into new home sales several ways ways.
- Homeowners cannot move up because they can’t sell their home.
- A glut of unsold homes means new home buyers can more home for less money by buying a used home, and they save money by not having to build the home, and spend a year renting.
- When homeowners do find a buyer its for less than expected, so the new home sale collapses and the the established home is taken off the market [2 potential sales gone].
- Real estate land prices are too high for home owners to sell and move up, so land sales are down and I believe that in this market, land prices are $100,000 over priced.
The Good side to this real estate gloom
The good news out of all this property gloom is that there are bargains all over for people that do buy a home right now. You can really push the envelope on home price reductions right now, and you can take your pick out of lots of great homes. When the market is hot, you have to rake over the leftovers of homes that nobody really wants. The low prices mean that interest rates rises are easier to cope with.
RBA rate rise warnings just hot air?
The Reserve Bank has been making noises over the last couple of months about a “rate rise soon”. But on the strength of the current economy right now this seems just hot air. And that’s not a bad thing. It good to remember that threat of a rate rise costs dampens housing demand, but costs homeowners no more in mortgage repayments. The downer is that it scares a home buyer out of offering you more for your home, or making them decide not to buy altogether.
Our Real Estate Tip.
Buy a home in this buyers market. Interest rates are still low.
We are tipping August or September as the likely time for an interest rate rise, so mortgage rates should remain low for a while longer yet.
Author: Mr Mortgage
