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…]

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…]

Is There a Credit Squeeze Looming?

WILL COMMERCIAL property investors and businesses be starved of ready funds during 2012?

Is there a Credit Squeeze looming?The banks seemed to be protesting about the increased cost of offshore borrowing. And using that as their excuse for not wanting to pass on any future RBA rate reductions in full.

But are they really telling you the whole truth? [Read more…]

Industrial Property Set to Surge

Industrial Vacancy Rates are fallingThe Queensland economy may be slow to recover from all its natural disasters. But it’s Industrial property sector has been quick out of the blocks.

The boom in Queensland gas now has Brisbane with the lowest vacancy rate for Industrial property.

Next comes Melbourne — with Sydney well back in 3rd place, according to a recent survey by Knight Frank.

And increasing demand will put further upwards pressure on rentals … thereby, encouraging more developers into the market. [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.

 

Commercial Property:
Pricing Your Finance – Part 2

Last week, you looked at the reasons why lenders view Commercial property in a different league to Residential property, when it comes to finance.

Many things can affect the Pricing of your LoanAnd then, we moved to the various aspects Commercial lenders look at as far as Risk is concerned.

More importantly, just how these aspects will determine whether or not they will actually lend against the actual property you are looking to purchase.

However, what you really want to know is … [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…]

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…]

Will They … or Won’t They?

Balance

Balance

Last month, the RBA left rates on hold — because of what it saw as mixed signals within the Australian economy.

And the rising $A is certainly making its job easier, by generally cooling activity.

Work Allocation

Work Allocation

Growth within the Construction industry appears to have fallen to its lowest level in 18 years. Although turnover for mining and processing plants has once again returned to its path of upward growth.
[Read more…]

Global Progress?

The IMF has recently trimmed its overall global forecast — down to 4.2% from 4.3%, for 2011.

Global GrowthThe emerging and developing economies are tipped to grow by 6.4% (with China’s growth being over 9%).

Whereas, the various advanced economies are expected to grow by a subdued 2.2%, on average.

However, any double-dip recession is considered most unlikely — as investment and domestic consumption has replaced the building up of inventories.

According to the IMF: “Investment in machinery and equipment is already showing strength in a number of advanced economies.”

Nonetheless, spending and investment in most advanced economies will be constrained by households replenishing their savings; and banks remaining reluctant to lend freely to businesses. Plus, the US housing market still languishes.

Overall, the lack of business investment (and therefore employment growth) will adversely impact on tax revenues. And thereby, make government debt reduction programs a slow process.

On all counts, Australia will continue to enjoy solid growth — relative to other advanced economies. And this will provide ongoing pressure for interest rates to rise, over the next three years.

All the more reason to lock in your interest rates long-term … for any Commercial property investments you intend to make.