Is Now The Time to Invest? Current Economic Indicators

Matisik Property Insights, June quarter report, provide some very interesting stats taken from the RBA, ABS, HIA and RP Data, to give us some insight into our current economic climate.

“Interest rates take between six and twelve months to stimulate the market and especially new housing starts. The economic conditions, given the rapid easing in interest rates to date and the large fiscal stimuli, should be much better during financial 2009/2010.

Unemployment lags, whilst confidence anticipates. Confidence in residential property as an investment, has improved dramatically over recent months. New dwelling sales are now starting to lift. New housing starts will follow in due course.

Looking forward, Australia (and most of the western world for that matter) cannot hope to pay back debt with low interest rates. Eventually interest rates will rise back to more neutral levels. Our cash rate is currently 3.00%. History suggests that a cash rate of between 6.00% and 7.00% is neutral.

Interest rates are likely to fall further, but not as fast nor anywhere near as much as in recent months. Jobs, and especially casual work, are still being created across much of Australia. Yet unemployment is on the rise due to a growing workforce, fuelled mainly by a lift in the participation rate. Fulltime work, however, is starting to slide, placing a lid, at present at least, on new housing starts. Hence interest rates are likely to fall a bit more.”

So what does this mean in a nut shell to us investors? Well, we are set to enjoy some low interest rates for a while yet. Perhaps start to consider fixing some debt in next year if the lenders bring back fixed rates in line with the variable, before we head back to more neutral levels.

Confidence is definitely returning in residential property investment so our window of opportunity in sourcing those bargains will begin to reduce.

We don’t have a crystal ball to see what lies around the bend however current indicators definitely show that things will bounce back. So why not take advantage of what so many others are yet to see.