On the up: What will higher interest rates mean for real estate investors in New Zealand and further afield?
The Land of the Long White Cloud is shaping up to raise rates and the country may well be a bellwether for the Australia...
Smart Property Investment’s panel of investment commentators have made their predictions concerning the RBA’s October rate decision, due this afternoon.
The RBA will leave rates on hold for October, according to the majority of Smart Property Investment’s commentators, despite some indicating that another rate cut is due to come within this financial year.
Liz Sterzel, managing director ofbuyer’s agency Property Wizards, believes that Malcolm Turnbull’s ascendency to prime minister may have given the RBA some breathing space, despite the continued worsening of commodity prices following recent market shocks.
“On the positive side, retail sales are up, the economy is moderating but still growing, and the new prime minister is aiming to restore confidence in the economy,” she said.
“The low Australian Dollar is helping the economy by making exports and tourism more attractive, and the record low interest rates are helping lift construction and services investment.”
Property academic Peter Koulizos, reflected this sentiment – arguing that the performance of the Australian dollar would be key to any future rate movements.
“My prediction is that interest rates will remain the same and won't be changed at the October meeting of the RBA. The decrease in the Australian dollar is working in favour of the economy and, at this stage, the RBA doesn't need to decrease interest rates. However, if the Australian dollar bottoms out and the economy is still sluggish, then the RBA might drop interest rates,” he said.
Cate Bakos, director of Cate Bakos Property, believes that market confidence is strong enough to prolong any rate cut until next year.
“Our dollar has weakened and Australian exports are once again more competitive. Unemployment figures haven’t worsened and our government changes have possibly increased public – and more-so business – confidence as opposed to creating instability.
“While we still have commodity concerns in relation to oversupply globally, I believe that the RBA will keep their powder dry for a rate cut in 2016 perhaps.”
Alan Fox, director of Propertunity, believes that recent lending changes have dissipated the need for any rate increases – citing auction performances as evidence of their impact.
“I predict the RBA will leave rates on hold in October. The APRA clampdown seems to be biting and having the desired effect on lessening investor demand. Auction clearance rates have been coming off the boil,” he said.
Opinion from Smart Property Investment’s two investors on the ground showed a marked difference in outlook, despite both commentators reaching the same prediction.
“Rates will not go up, they will not go down, they will stay the same. This is a sure thing,” he said.
“What a great month of property news it's been. The biggest news for me was reading that the auction clearance rate has decreased from its peak in the 90 per cent to now in the early 70 per cent – one of the first [signs] that the boom is over. Why? Maybe the increased interest rates for investors, maybe that some banks are asking for more of a deposit for these new 'risky' postcodes, maybe investors are looking at other cities.
“Regardless, the Sydney and Melbourne property hysteria is calming down and property articles are making their way back into the back of the newspaper.”
Investor Jonathan Preston was less sure – pointing to market activity overseas and domestically as a precursor to future rate decreases.
“September brought about some interesting developments. ANZ stuck their neck out with the 1.5 per cent rate call, based on the idea that the unemployment rate is [set] to rise rather than fall. There is also a lot of commentary coming out about auction clearance rates decreasing, which indicates that the property price concerns by the RBA will be somewhat alleviated," he said.
“Lastly, with the US Federal Reserve holding off on increasing rates in the US, the AUD/USD is unlikely to drop significantly further in the short term, which is not what Glenn Stevens wants. All of this points to the next move being down. I don't necessarily expect it to happen this month, but if not this month then by March next year,” he said.