How Will the RBA’s Decision Affect Commercial Property?

NOT EVERYONE was expecting the RBA to further ease the cash rate, when its Board met this week.

Some felt the Board would simply “keep its power dry”, and just wait to see how the outcome of the 17 June election in Greece unfolded.

Some economists like Saul Eslake (of Merrill Lynch) felt that the $2.5 billion of cash payments by way of government compensation for the carbon tax, would serve as “enough stimulus” for now.

But maybe, such thinking took too simplistic a view of things. [Read more…]

Is the Mining Boom Causing a Surge in New Cafes?

New Restaurants & Cafes are emerging everywhereFOR SOME time now, the RBA has been as assuring us of the flow-on benefits soon to reach the non-mining states of Victoria and New South Wales.

However, these benefits may not be very easy to recognise. And so, let’s attempt to make things a little clearer. [Read more…]

Is The Mining Boom Masking a Major Problem for Commercial Property in Queensland and WA?

Queensland & WA will have the greatest amount of Distressed PropertyTHIS RATHER pressing issue appears to be receiving little or no coverage at all.

But if you listen to the insolvency firms, Western Australia is about to become the “hot spot” for distressed property.

And as you can see from the chart, Queensland well and truly holds the the crown at the moment. [Read more…]

How Commercial Property Investors Benefitted From The Past 7 Days?

The Reserve Bank believes things are on the up.LAST TUESDAY, the RBA left the cash rate on hold — much to the surprise of most pundits. And yet, only the week before, that’s exactly what I suggest would happened.

You might also remember I suggested that you lock in a fixed rate mortgage — because it was then about 1% below the variable mortgage rate.

Many scoffed, and said that rates will continue to come down. Well, the past 7 days have certainly put paid to that theory — with the big 4 Banks raising their rates, quite out of step with the RBA. [Read more…]

How Can Commercial Property Investors Make Any Sense of the Retail Scene?

What's needed is some Retail TherapyACCORDING to the Australian Retailers Association, its members are projecting $39.5 billion in sales from mid-November until Christmas — reflecting an overall increase of just 2% on last year.

Many shoppers still remain extremely hesitant, despite the RBA’s recent interest rate reduction.

Although, with household savings at record levels … people may simply be holding back on their main splurge splurge, until the post-Christmas sales. [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.

 

Why All The Panic?


Are we really heading for GFC Mark II?

Well, not here in Australia anyway! And even overseas, things are vastly different this time around.

In 2008/09, it was private debt causing the problems … because nobody was too sure which banks were overly exposed to the sub-prime mortgage problem. [Read more…]

OK … What’s Going On?

Last weekend in the Financial Review, Andrew Clark began his article (on page 52) with the words:

“Australians don’t know if they’re in the middle of a pause that refreshes or the dullness before the deluge.”

That about sums up the general feedback I am receiving at the moment, from clients and colleagues alike.

Clark felt this probably stems from a combination of …

  • a lack of Federal leadership,
  • declining retail turnover,
  • poor flow-on from the mining boom and
  • the spectre of financial defaults overseas.

Presumably, this was behind the RBA’s decision to keep the cash rate on hold until next month — pending more economic data in the coming weeks.

On the plus side …

The IMF predicts solid growth going forwardAccording to the IMF … in spite of all the recent turmoil, the outlook for global economic growth appears quite rosy moving into the new financial year. [Read more…]

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…]

The RBA Keeps Its Powder Dry

RBA Explains Australia's Economic Position Yesterday, the Reserve Bank decided to hold the cash rate steady at 4.75%.

However, it also acknowledged that Australia’s underlying inflation rate will now be running at around 3% for the year — and that’s ignoring volatile items, like petrol and food price spikes.

Economists tend to agree that the high $A has effectively done much of the “heavy lifting” for the RBA.

But as these graphs show, the RBA will most likely be forced into a midyear rate rise. With at least one further rise likely, before the end of 2011.

Put simply: Increasing business confidence (confirmed by improved Business Credit figures) means more investment being undertaken by business … which will in turn will put pressure on wage rates.

So far, the RBA has displayed a bias towards pre-emptive action. And there is no reason to suggest it would suddenly change that approach. As such, many people have been left confused by yesterday’s decision.

However, astute Commercial property investors recognise the time to strike is when the “uninformed” are dithering … due to their lack of understanding.


Rates on Hold … For Now!

Inflation Watch
Yesterday, the Reserve Bank left the cash rate unchanged at 4.75%. And these graphs will help to explain their current dilemma.

For the time being, the RBA’s focus is upon “inflation excluding volatile items” — mainly because of the various natural disasters, both here and overseas. [Read more…]