Interest rates: Another step to ‘normality’

•    The Reserve Bank has lifted the cash rate from 3.75 per cent to 4.00 per cent. If banks fully pass on the rate hike then repayments on an average $300,000 loan would lift by just over $47 a month.
•    The Reserve Bank has given no guidance on future rate decisions other than highlighting the fact that borrowing rates should “be closer to average”. Overall, that suggests rates have another 35-70 basis points to go.

What does it all mean?
•    It’s important not to over-analyse the latest interest rate decision. The Reserve Bank has lifted the cash rate for the simple reason is that it is still too low for an economy that is getting back to normal. And if the economy continues to improve, then we can expect the Reserve Bank to lift rates further.
•    Certainly the rate decision will be ‘live’ for the next few months. The Reserve Bank doesn’t want people to assume that it has tunnel vision – that is, it is fixated on some specific interest rate goal. But the Reserve Bank Governor has provided good broad guidance, noting that interest rates are around 50-100 basis points away from ‘normal’. CommSec has consistently noted that the cash rate will be between 4.50-5.00 per cent late in 2010 and there has been nothing of late to sway us from that view.
•    The one point that should always be kept in mind when rates are rising is that just a third of the population is in the process of paying off home loans. Another third are renting and the remaining third of families own their homes. The home-buying population wouldn’t be shocked by the rate decision – many of the longer-term mortgagees would be well in front in their repayments. Renters would be unfussed by the rates decision with anecdotes that some landlords are offering incentives at present such as the first month free. And home-owners would be cheering the lift in interest rates with a view to higher term deposit rates.
•    When the Reserve Bank is contemplating monetary conditions in the economy, it isn’t just thinking about the cash rate and interest rates applied by lenders. It also has to keep in mind the Aussie dollar. The Aussie dollar remains strong, hovering near US90 cents and at 25-year highs against the British pound. The high Aussie may be good news for travellers, but it is keeping the pressure on exporters and tourism-dependent regions.

Interest rate decision and past cycles
•    The Reserve Bank Board has lifted the cash rate by 25 basis points to 4.00 per cent – the first rate hike since December last year. In October 2009 cash rates stood at a 49-year low of 3.00 per cent. After quarter percent rate hikes in October, November and December the cash rate stood at 3.75 per cent. Rates were left unchanged in February before today’s decision to lift rates again.
•    In the last rate cutting cycle the cash rate fell to lows of 4.25 percent in December 2001. In the two previous rate cutting cycles, the cash rate fell to lows of 4.75 per cent. So rates are still historically low.
•    If banks pass on the latest rate hike in full, the average bank variable housing rate would lift to 6.90 per cent. Still, it’s important to note that the mortgage rate has averaged 7.60 per cent over the past 5 years and 7.25 per cent over the past decade. Mortgage rates are still low – up to 70 basis points below longer-term averages.
•    The Reserve Bank hasn’t given specific guidance, other than noting that further rate hikes lie ahead: “Interest rates to most borrowers nonetheless remain lower than average. The Board judges that with growth likely to be close to trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process.”

What are the implications of today’s decision?
•    The Reserve Bank is taking its time in lifting rates to more ‘normal’ levels. It knows that it has time on its side. Other major central banks haven’t started lifting rates yet and global jitters still remain. Meanwhile, at home inflationary pressures continue to ease. Add in the continued strength of the Aussie dollar and it’s clear that the Reserve Bank hasn’t got a defined month-by-month plan to lift rates.
•    While consumers are confident, they remain cautious about spending. And with interest rates up again, that hesitancy to spend will continue. Larger retailers are better able to withstand this period of consumer conservatism as there are limits to how far and how long smaller retailers can cut margins.
•    Competition for domestic funds is expected to remain intense, representing attractive opportunities for savers.
•    Ignore any stories about borrowers under pressure as a result of the latest rate hike. The number of borrowers experiencing stress as a result of the latest rate hike would be extremely small. Most borrowers, as well as most lenders, have assumed substantial rate hikes into their planning and budgeting decisions.

Should I sell my house in winter?

Most home owners, especially those contemplating selling, take more than a passing interest in property sales and especially Auction results.   If asked, most property owners would say that winter is not a good time to sell because it is cold, wet and the garden does not look at its best.  Strangely, this opinion is not shared with prospective purchasers.

Most purchasers, during the colder months of the year, are very committed and anxious to obtain a property that suits their needs.   At Brock Harcourts Flinders Park we monitor all incoming phone calls from whatever source and year after year, we have proved that contrary to popular opinion the Winter months are an excellent time for selling due.

Some of the best sale prices are regularly achieved during the months of June, July and August.

 Buyers have less to choose from because plenty of home owners hold off selling until spring.   Consequently, the length of time any property is on the market is often less than later in the year because of the relatively small number of properties available for sale.

If you are thinking of selling, now might be just the time to maximise the price of your property, if you would like a free, no obligation appraisal then please feel free to call me.

Liz Varas
Property Consultant
0433 200 276
www.lizvaras.brockharcourts.com.au

Do I put an offer in before auction?

Whether to put an offer in prior to an auction, bid at auction or hope it doesn’t sell at auction and negotiate after is always a tough dilemma.

Our team has got together to provide you with the pro’s & con’s considering the circumstances and will blog different scenarios over the next week.

Scenario
You want to put an offer in before auction and you know there is a lot of interest, you love the home. You put your offer in and the owner has decided that they will sell before auction.

In this scenario it will become a ‘blind’ auction. The agent then calls all parties and asks them to submit their offers before auction. There will likely be multiple offers due to the high level of interest.

The agent will collect all offers and present them to the vendor with the highest/best offer being accepted.

As the buyer you wish to know;

1)                  Is my offer the highest?
2)                  What is the other offers?
3)                  What if I’m just below another offer

The agent cannot disclose any of the other offers to any buyers and therefore these questions cannot be answered.

 Obviously there is only 1 person who buys the home and in this scenario you miss it.

 The agent contacts you and advises you that you have missed the home and there is no second chance.

 Your question to the agent is:

“How much did I miss it by or how much did it go for? When you find out it sold for a small amount higher than your figure you may feel that had you known the answers to all your previous questions you would have had a better chance of buying the home.

Our answer to this blog question ‘Do I put an offer in before auction? Is NO! don’t submit an offer before auction. Not unless other offers have been submitted before auction and you have been told it will sell before the auction, as should your offer not be acceptable to the owner you have now disclosed to them and the agent your price. We suggest you attend the auction as it is a transparent competition and you will know all the other offers and not miss it by a small amount with having the chance to reply with an increased bid.

Keep an eye out for our next blog with a different scenario on ‘Do I put an offer in before Auction? With the scenario based on minimal interest in the property.

Mark Sheppard
Auctioneer, Principal & Property Consultant
0411 476 460 
markshepprd.brockharcourts.com.au

Brock Harcourts Mile End Auctions during June

Auctions – the way to sell in this market!

Even the rain couldn’t dampen the spirits of first home buyers last Saturday. Any thoughts that we are in a recession would have quickly disintegrated upon the arrival of the crowd at Mile End for the auction of a unit at Falcon Avenue. The 25 bidder registrations came as no surprise, as there was a strong attendance at the open inspections throughout the campaign.

 I would challenge you to determine if this was luck. Two weeks ago two larger properties we marketed in a different price bracket that we auctioned – a character bungalow at Cowandilla and another in Mile End. Both attracted a large crowd and plenty of interest. Both of these homes were successfully sold, one achieving a record price. A comment from the auctioneer and the agent, Mark Sheppard the Principal of Brock Harcourts Mile End, could not have proved to be more true – “ladies and gentleman – it has been said that we are in a recession and the property market is in decline, we sure haven’t seen that today”.

It is a common misconception in the market place that auctions don’t achieve a good result. To achieve a successful outcome at auction, you must rely on more than luck and ensure that your agent creates the right atmosphere on auction day, which requires a lot of behind the scenes work that involves diligence, hard work, strong marketing and an agent that is willing to go that extra yard.

Marina Davydova

Call or e-mail , Mark or myself of Brock Harcourts Mile End,
for details of these sales or for a free appraisal of your home
M: 0430 297 994 E: marina.davydova@brockharcourts.com.au
M: 0411 476 460 E: msheppard@brockahrcourts.com.au

New Era for an old Suburb – by Craig Baynes

When people in the past spoke about Brompton, Bowden, Ridleyton & Ovingham it was usually followed by terms such as industrial, depressed or some other negative description. No More! Recent years have seen a resurgence rarely seen in inner Adelaide with extensive redevelopment, starting with the old Rowley Park Speedway (which is now Brompton Green), through to the West Street and surrounding developments and on to the Clipsal Project, which we hear will have in excess of 1700 homes.

Ask yourself, would a developer spend millions and millions on projects that are dead ducks or would they spend in areas they see excellent potential.

I chose to be a specialist in the area because all I could see was fantastic potential and I wanted to be a part of that. Personally I believe the best is still ahead with new growth, improved infrastructure and people that see now to the future that desire to be a part of that too.

Digging up the dirt – a historical walk of Brompton

http://www.abc.net.au/local/stories/2009/02/11/2488281.htm?site=adelaide