Interest rates are worth keeping an eye on, however investors need to make sure they're prepared for when they inevitably begin their climb back up. A number of research houses are suggesting that this may occur as early as the beginning of 2014.
In the meantime, AMP Capital's Shane Oliver has shared with Smart Property Investment his 'factors to watch' over the year ahead. He explains that this list is based on factors that every investor can quite easily watch, rather than lists of numbers that can bog down and confuse even the more seasoned of economists.
The share market
The share market is worth watching in a general sense, because if it trends upwards, and then continues to do so, then ultimately this will tell us that the rate cutting cycle is at or near its lows. Share markets are a good barometer of global and economic confidence ahead, they don’t tell us what is happening now but are usually a good guide of what is about to happen down the track.
Global economic conditions
If there is less bad news coming out of Europe, this can be a sign that rate cuts will be fewer in the future. For an average Australian, keep an active eye on your nightly news flow, and note stories that talk of a continued housing recovery in the US and stronger growth coming out of China. All of those things are worth keeping an eye on. When bad overseas news quiets down then we know we are closer to the bottom with our rates. Positive news coming out of America, such as that seen recently with the fiscal cliff, and other general positive economic can be clear signs.
Rising commodity prices
This is worth watching as another guide we’re reaching a low point in interest rates. On the direct opposite to this, a drop in commodity prices can signal more rate cuts to come.
Auction Clearance Rates
Usually weekend auction clearance rates are reported in the media around Sunday and Monday, and are worth keeping an eye on. Housing isn’t the guide for everything, but auctions can be a good indication of whether home buyers are coming back into the market or not and therefore whether interest rate cuts are doing the job. So far the news on this has been a bit mixed, although they’ve improved since early 2012. I expect this will pick up as the year proceeds.
If shops are starting to fill again, and vacant spaces are disappearing, then this is a sign that there is a pick up in the retail sector. A decrease in vacant shops shows that rate cuts may be getting traction. Similarly, shops moving around, particularly from those high-rent spaces in the middle of the centre, towards the perimeter where they achieve cheaper rent, can be signs of more rate cuts to come.
For Sale signs
For property investors, the last tip should be easy to keep an eye on. If you see properties on the market selling quickly, this may also be a sign that the market is moving again.