Interest Rates - Steady as She Goes

Published on Topic:

So, interest rates remain on hold by the RBA at 1.50%. With an inquiry into the financial sector, it would be a very brave bank that raised interest rates at the moment. What we are now seeing is APRA growing some teeth that is supporting the muscle it used to slow investment lending and a recognition that some practices were perhaps a little too easy for some borrowers to access loans. The benefit of all of this is that it has placed a residential market on notice and made it far less likely that an oversupply of product will emerge that may have taken many years to absorb. So, whilst there is short term pain in most east coast residential markets based around lending practices, the reality is that it will again reach an equilibrium sooner rather than later.

SEQ remains a market that is likely to be the most transformative over the next five years with billions of dollars being spent in infrastructure projects and urban form that will truly make Brisbane one of Australia's New World Cities. It also doesn't have the long settlement tail that is wagging the Melbourne land market which has had a truly extraordinary run.

Whilst there are many doomsayers at the moment talking down the virtues of property, the simple reality is that if APRA hadn't stepped in, the banks hadn't tightened lending practices and forced markets to slow, the downside would be significantly greater. If the RBA drops interest rates, then we all have a lot more to be worried about because that speaks volumes about the National economy and World economy. Those circumstances would signify that a correction in prices of substance was a greater possibility. Until then, don't read too much into the headlines.