Is There a Property ‘Bubble’?

There has been much public debate recently about ‘bubbles’, ‘booms’ and pending ‘busts’ in the Australian Property Market. With mass media running headlines based on overseas (and some local commentators saying we’ll see prices drop by 30%, Australian property market experts can hardly get a word in.

So, what is the truth and where is property going in Australia and here on the Sunshine Coast over the next 10 years?

Breaking News – Rates on Hold

Volatile financial markets caused by problems in European economies forced the RBA to keep the cash rate steady at 4.5 per cent for the second month in a row.

After three consecutive rate rises earlier in the year, the RBA today decided to leave rates on hold in July.

“The current setting of monetary policy is resulting in interest rates to borrowers around their average levels of the past decade. Pending further information about international and local conditions for demand and prices, the Board views this setting of monetary policy as appropriate,” governor Glenn Stevens said earlier today.

The RBA has raised official interest rates six times since last October, taking the official cash rate from the historic lows of 3 per cent to what the central bank considers a more normal rate of 4.5 per cent.

But while interest rates are largely considered to be back at ‘neutral levels’, a spray of new data suggests future rate increases remain on the cards.

The monthly TD-Securities-Melbourne Institute inflation gauge rose 0.3 per cent in June for an annual reading of 3.6 per cent – well above the RBA’s 2 to 3 per cent inflation target band.

In addition, ANZ’s latest Job Advertisements Series found job ads are currently growing at the fastest rate since November 2007.

The total number of jobs advertised rose by 2.7 per cent in June, to an average of 169,690 per week.

But ANZ’s chief economist Warren Hogan said the recent strength in job advertisement numbers is not broadly-based.

In fact, the rise in job advertisements was driven entirely by a 3 per cent rise in internet advertising.

“The mixed result for the Job Series only added to the RBA’s case for keeping policy rates unchanged for now,” Mr Hogan said.

(Written by The Adviser)

Will we be wrong again in 2010?

It seems our predictions for 2009 didn’t seem to come to pass.

Many thought prices would fall significantly due to the global economic crisis, and they didn’t.

Then we expected prices would ease when government grants to first-home buyers dropped, but that does not seem to be happening either. 

So where do we sit at the beginning for 2010?

“I was hopelessly wrong on house prices! Ask me how.”

Followers of the financial press will by now have heard that doomsday economist Steve Keen has lost his high-profile bet with Macquarie Group economist, Rory Robertson.

Keen rose to national attention in 2008 after predicting that housing prices in Australia were on the verge of a collapse. Unsurprisingly, the tabloid media leapt onto the sensational story, generally failing to mention that Keen’s views were not shared by any other mainstream economist.

Rory Robertson was himself quite pessimistic about Australia’s economic outlook at the outset of the Global Financial Crisis. However, after a public email debate on the Australian housing market, Robertson challenged Keen to a bet on Keen’s views that housing prices would collapse by the end of 2009.