Given the recent financial turmoil overseas, there are several questions that seem to be continually surfacing.
Can the world live with a ballooning US trade deficit? Are asset prices currently too high? Does anything good actually come from outsourcing to China and India? How will all that’s going on affect you as a Property investor?
To fully address these questions, you first need consider the change in the way Western companies are now operating.
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There has been much written over the past few weeks about the likely fallout from what’s been occurring in the United States. And some economists even feel it might be on the brink of recession.
The week, their Federal Reserve sought to address the immediate affects of the housing slump and the sub-prime crisis — by reducing US interest rates by 50 basis points.
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In an “earlier posting”:https://commercialpropertymadeeasy.com/2007/06/26/family-finances-are-being-stretched/, I raised concern over the dramatic increase in household debt — to the point where it now sits at over 150% of household disposable incomes.
As you can appreciate, the major concern has been as to how rising home-mortgage interest rates might cause a flow-on effect for Commercial investors. And this is because a fall in residential prices could adversely impact upon the security for any line-of-credit you may have against your home.
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The recent stock market instability has been more related to investor panic, than to any logic or reason. And you’re not about to see a stock market collapse — which has now been confirmed by Monday’s rebound, following 0.5% rate reduction by the US Federal Reserve.
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There has been so much written in the media lately on both political parties. And everyday, you read predictions of a loss by the Coalition, come the election in November/December this year.
However, I recall reading earlier in the year about a study done on elections all around the world, during the past 30 or 40 years. As a result of this study (and despite the present media hype), these various election outcomes have apparently hinged upon three key performance indicators (KPI).
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Last week, the Reserve Bank of Australia (RBA) held its cash rate at 6.25% for the eighth month in a row — a decision welcomed by the Government and home buyers alike.
Inflation figures (due out later this month) could put pressure on the RBA to lift rates. However, the high Australian Dollar (at around US 85c) means that there is no external pressure on inflation, from imported goods. And, despite the higher dollar, demand for our exported commodities remains at record levels — which has in turn narrowed our Trade deficit.
Therefore, even with our GDP growing, inflation seems to have remained in check. And this is likely to continue — given the modest wage increase just granted with the Fair Pay Commission.
While the RBA has left interest rates on hold at 6.25% … our rates are still well above other major countries. That makes Australia an attractive place for overseas funds — which is causing our dollar to remain high. And you should see this situation continue for the next 4 to 5 months.
Then, as other countries start to increase their own interest rates … you will quickly see our rates follow suit.
When I made mention of the revolving building planned for Dubai, a couple of people came back to me with some fascinating material.
If you’re interested you can “take a look”:https://commercialpropertymadeeasy.com/assets/2007/4/24/DubaiProjects.pps at what’s really going on over there.
Imagine a building that makes oxygen … distils water … produces energy … and changes with the seasons. It’s all possible with the technology we now possess. Yet, in some cases, going “Green” it is simply too cost prohibitive.
However, in Dubai, they now have plans for a completely-revolving, 30-storey Tower — designed by Glen Hawells. And you’ll find that stored solar energy will power the revolving motion.
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In its Construction Cost Commentary for January 2007, the Rider Hunt offices report tendering activity continues to surge in most Australian cities, Sydney being the only location bucking the trend. In New Zealand, sustained levels of Building Consents and the coming on-line of some major projects indicate continued high levels of activity in 2007.
What I’ve done is to bring you some extracts from that report, And you’ll notice that Brisbane, Perth and Darwin are currently the strongest markets.
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You are always reading about how China has been breaking annual growth records. And then it was India’s turn to steal the limelight.
But after throwing off the Soviet shackles, Vietnam signed an accord to roll back trade barriers with the USA. And its stagnant economy has literally leapt into action.
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