Finance advice
Rates set to rise further in 2017

Rates set to rise further in 2017

By John Flavell

Looking ahead to 2017, a rate rise may be on the cards for Australia.  

The US Federal Reserve said last year that the recent progress of the economy gave it the impetus it needed to increase the federal funds rate by 25 basis points to 0.75 per cent.

It also indicated that the federal funds rate could rise by a further 75 basis points throughout 2017 through three separate rate increases.

This announcement, combined with the fact that many of Australia’s lenders have started to raise rates across their suite of home loan products, would suggest a cash rate increase by the Reserve Bank of Australia is now more of a possibility than not in 2017.

The RBA had previously stated that the easing bias has passed and the latest changes by the US central bank would support this.

Of course, even if rates rise, it is important for borrowers and potential borrowers to keep in mind that interest rates will still be very low by historical standards.

Any rate rises are likely to be small, which will help keep the cost of borrowing affordable. As a result, I would expect certain parts of the property market to remain strong.

Property prices are driven by four key factors: supply versus demand, the cost of credit, access to credit, and overall employment levels.

Across the country, property demand remains relatively strong. In Sydney and Melbourne, the level of stock coming onto the market has fallen over the last 12 months. Listings in Sydney and Melbourne are down 9.4 per cent and 2.9 per cent respectively.

When you combine falling stock levels with clearance rates above 75 per cent, it is clear that demand remains strong in both capital cities.

Despite the latest spate of interest rate increases, home loan rates remain historically low, keeping the cost of credit at affordable levels.

And while many of Australia’s lenders have tightened their lending policy over the last 12 months, they remain hungry for business in both the owner-occupied and investor space, a trend that will continue as we head into 2017.

Furthermore, unemployment remains low by long-term standards. Latest data from the Australian Bureau of Statistic shows the unemployment rate is currently sitting at 5.7 per cent, which is a positive sign for the economy as a whole.

With all of this in mind, I wouldn’t be surprised to see continued growth in property prices across some markets, specifically Sydney and Melbourne. While the level of growth may not be as strong as we have seen in recent years, overall, we can expect to see growth continuing.

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About the Blogger

John Flavell

John Flavell

John Flavell is the CEO of Mortgage Choice. He first joined the company in April 2015, armed with more than 20 years' experience in executive leadership positions and 15 years' experience in financial services.

Prior to joining Mortgage Choice, John held several senior executive positions including National Australia Bank's general manager third party distribution and MLC's executive general manager wealth advice.

John has also worked for Aussie Home Loans where he was part of the executive team responsible for the successful transition of the business into mortgage broking, and RAMS Home Loans where he was responsible for managing the southern half of the country and driving brand awareness. 

He holds a Diploma in applied Finance, a Graduate Certificate in Financial Services, as well as a Certificate IV in Mortgage Broking. In addition, John is a Fellow of the Australian Institute of Company Directors (FAICD). 

In his role at Mortgage Choice, John is responsible for managing the company's operations to ensure continued business growth and development, encouraging 'blue ocean' thinking with a focus on customer acquisition, product diversification, improving productivity and increasing profitability and market share.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

" ["fulltext"]=> string(818) "

To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

    \r\n
  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1208 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

" ["fulltext"]=> string(2323) "

Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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