The Reserve Bank of Australia has announced Market speculation suggests that further rate cuts are expected in 2016, the result of its monthly board meeting
The RBA left rates on hold at 1.75 per cent as expected, the RBA is taking a ‘wait and see’ approach after last month’s cut, with data remaining mixed.
Inflation remains critical but bias remains solid for another cut this year, a near term rise in US rates may force the RBA hand act, not enough has happened in the past month to bring on another move today.
GDP came in at an unexpected 1.1% jump in the last month taking GDP to 3.1% a good figure largely due to a chunk in exports of LNG. This does not give much comfort to the health of the economy as wages are at its lowest level and new full time jobs seem to have disappeared. The transition from the mining boom is proving to be slower than expected, coupled with the austerity fiscal settings in both the 2014 and 2015 federal budgets.
Residential housing values have increased by 1.6% in May 2016 and 3.6% higher over the last three months to May 2016. Perth and Darwin are the only two capital cities where prices have fallen. Capital city property values have increased by 10% over the last 12 months which translates to a 7.3% increase to April 2016, however lower than the peak of 11.1% in July 2015.
Residential property remains the preferred asset class for investment.
The annual change in residential dwellings in the capital cities is as follows
Sydney 13.1%
Melbourne 13.9%
Brisbane 7.1%
Adelaide 3.9%
Perth -4.2%
Hobart 6.1%
Darwin -3.5%
Canberra5.7%
Economic data remains mixed with lending for both owner occupier and investor recording a decline perhaps caused in part by the changes to the investor lending sector attracting higher interest rates and bigger deposits. There has been an increase in refinancing due to falling interest rates and borrowers are taking advantage of the low interest rate environment. The four major banks have experienced a run off, with up to 25% of their customers dissatisfied. The satisfaction of home loan customers is led by ING at 94.3% whereas the majors are languishing at the bottom below 76%
By segment
First home buyers
Nov 2015 May 2016
60.7% 62.7%
Refinances
73.1% 77.8%
Investors
52.4% 53.5%
Chinese demand for Australian residential property is showing no signs of slowing, the most popular dwelling type by Chinese investors is
58% Apartments
24% Townhouses
16% Houses
2% House and Land Packages
41% Investment
26.7% Education
19.3% Migration
12.2% Life Style
Of great concern to the community there are reports of NAB manipulating the BBSW (Bank Bill Swap) rate to trade in products to generate profits using this rate. This is only the tip of the iceberg as there is a lot happening in our banking sector by the big four that needs to be uncovered and it remains our view only a Royal Commission will expose the full extent of this behaviour. Perhaps it would be prudent to look at 2nd tier banks for your banking.
