What Will Happen to Interest Rates
When The RBA Meets Next Week?

THE GENERAL consensus seems to be that the RBA will further reduce rates by 25 basis points. But can this view be fully justified; and what does all this mean for Commercial property investors?

The RBA faces a real DilemmaMost pundits would point to the recent CPI figures and say “Yes”! And on the surface, an underlying inflation rate of 2.5% per annum is plumb in the middle of the RBA’s stated target zone.

Yet despite what seems to be a rather hesitant mood by consumers, inflation in the service sector actually surged by massive 4.4% per annum. And some other sectors (not affected by overseas competition) also finished the year strongly, growing by 3.9% per annum. [Read more…]

Commercial Property: The Impact of China

LAST week, The Australian newspaper invited three Commercial property experts to respond to the following question:

If China’s growth story begins to peter out, what will be the impact on Australia’s commercial property market?

China's Impact on Australian Commercial PropertyThose experts included … Greg Marr (MD of DTZ), Tony Crabb (Research Head of Savills), together with me (as CEO of Properly Edge Australia).

And you can read all three responses, which appeared in Saturday’s Weekend Australian [Commercial Property 3]. What I’ve included here below is my contribution to that analysis … [Read more…]

Will the RBA Cut Rates Again?

 This may well be the last Interest Rate Cut
Last week’s inflation figures were certainly much better than expected.

As such, there had been considerable political pressure placed on the RBA from by the government to cut interest rates this week.

Retailers were virtually pleading with the RBA to do so. Plus, homeowners were also looking for some relief in the run up to Christmas.

However, this is probably the last interest rate cut by the RBA for quite some time. To understand why, you need to cast your mind back to when the GFC began in 2008.

RBA has a real Dilemma going forwardAt the time, business investment was falling.

This is unlikely to occur from now on — because planned mining investment (at $430 billion) is three times greater than in 2008, representing about a third of Australian’s GDP.

And overall, Australia is said to have around $900 billion of business investment in the pipeline.

Furthermore, our main trading partner (China) is now far less dependent upon Western countries for its growth.

In 2008, China’s 12% per annum growth in GDP reflected a 3% to 4% component of exports to the West. While this year’s 9.5% growth in GDP was basically driven by domestic demand — with virtually no exports involved.

Overall, there is said to be around $900 billion of business investment in the pipeline. Add to that the improved stability of Australian banks, with their reduced offshore exposure and improved domestic deposits. Plus, an increase in the Tier 1 capital ratios.

Finally you also need to remember the RBA’s cash rate has now fallen from 7.25% in 2008 to its current level of 4.5% today.

Bottom Line: Apart from the current turmoil in Europe, Australia’s underlying fundamentals are solid. And these augur well for strong growth in Commercial property over the next 5 years.

To reduce interest rates any further would only serve to artificially inflate asset prices — rather than allow the market to grow organically … based upon genuine, sustainable demand.

 

RBA Reprieve …
But don’t be Fooled

The RBA appears to be performing a rather fine balancing act.

Key factors affecting the RBA's future decisionsIts Board knows rising inflation is about to emerge. And this is only temporarily masked by a poor March quarter, following the nation’s flooding earlier in the year. [Read more…]

Your 8 Investment Objectives

Commercial Buildings

WITH THE Commercial property market now starting to gain some momentum, it might be worthwhile reviewing your current Investment Objectives — simply to ensure they align with your underlying investment strategy.

In formulating that strategy, you may choose to vary the specific order of importance for the following set of Objectives. [Read more…]

Your Common Property Terms (A-C)


AS YOU can appreciate, I quite regularly get asked to explain what the various property terminology actually means.

Therefore, I thought it might be worthwhile to provide you with your own point of reference, over the next couple of weeks.

And I’ll do that by giving you various definitions starting with those items ranging from “A to C”.

That way, you will be able to quickly find the answer — whenever you are unsure about any property jargon being thrown around, by people who may be simply trying to show off.

What you’ll find here are practical definitions, intended for the every-day Investor.

A to C [Read more…]

The Spectre of
Rising Interest Rates

Interest rates still to rise
The Reserve Bank of Australia (RBA) is not seeing the Australian flood disasters as having a prolonged effect upon the national economy.

It certainly expects the March quarter GDP to decline by 0.5%. But it is then projecting a 4.25% surge, over the remainder of this year. [Read more…]

Retail Reality

Wallet Workout
As this graph shows, there has been a strong long-term relationship between unemployment and retail vacancies.

And were you to base your Investment decisions on this measure alone, you could be forgiven for assuming there will be a healthy couple of years ahead of the retail sector as a whole.
[Read more…]

Most Economists Agree …

Which, when you think about it, is quite an achievement in itself!

Missed opportunity?

About a fortnight ago,Treasurer Wayne Swan was crowing about the Labor government’s achievements during his Mid-Year Outlook.
[Read more…]

Why November?

Most people seemed taken by surprise, when the RBA chose to raise the cash rate to 4.75% on Cup Day this week.

However, with Oaks Day being held yesterday, I thought today would be better timing for this post.

Price Pressures

Price Pressures

Sure, the September quarter CPI had fallen to within the RBA’s target range. And yes, there is still some uncertainty overseas.

However, with industry facing capacity constraints and the mining boom heading towards previous levels … inflation is poised to accelerate during the December quarter, as wages start to rise.
[Read more…]

Taking Stock of Commercial Property

As I mentioned in a recent email to some Clients, it’s been surprising how few quality properties have been forced onto the market — given the difficulties caused by current global turmoil.

You’ve heard so much lately as to how bad things are. But let’s undertake a quick comparison for Australia — between 1990 and now.
[Read more…]