10 Jan Interest rates will remain steady – Stephen Sharry
With a lot of focus on interest rates, Stephen Sharry from PropertyTV says the smaller banks and the mutuals, and that’s without even going to second tier lenders, are lifting their game and they’re being quite aggressive out in the market. He looks at how that will play out this year.
Kevin: Looking further forward into 2019, joining me now is Stephen Sharry, Editor in Chief. Is it Editor in Chief or Editor and Chief?
Stephen: No, Executive Editor.
Kevin: Oh, my apologies. Executive Editor. You’re still the boss though. You boss all those journalists around. Don’t you.
Stephen: I don’t think so. They tell me what to do.
Kevin: Oh, do they?
Kevin: Executive Editor at Property Television. Propertytv.io. Check it out. There is a link on our website to take you there.
Kevin: Stephen, your take. Last week we looked at 2018 and your view on that. Let’s have a look at 2019. What do you think’s going to happen this year? What’s your crystal ball say?
Stephen: Well look, I think it’s pretty evident that interest rates are going to remain stable for the year, if not for 18 months, unless something very untoward happens. I think the RBA are being incredibly cautious at maintaining current level of around that 1.5% in the cash rate.
Stephen: So I think the economy is doing okay. As I said last year, I think we’re going to see some changes in the source of … some of the source of funds. I think the bigger banks are going to pull back somewhat because they’ve tightened their lending criteria. But the smaller banks and the mutuals, and that’s without even going to second tier lenders, are lifting their game and they’re being quite aggressive out in the market.
Stephen: I think Sydney will continue to soften as will Melbourne. And some are predicting big reductions. I saw one the other day of 20%, Kevin. I’m not sure whether we’re going to go that low. But there’s some tremendous opportunities there for people who want to upgrade and intended to upgrade in that Sydney market, so long as they’re not dependent upon selling an existing house. If they’ve already done that, some tremendous opportunities to save up to a quarter of a million dollars on some properties.
Kevin: Yes, the report you’re referring to is an interview we carried several weeks ago with a 20% drop in prices predicted by the ANZ Bank. I think, too, we’ve got to remember that the price growth in Sydney, in particular, over the last couple of years has been astronomical.
Kevin: So it’s really just … it could almost be looked upon as a bit of a correction as long as we understand that those are only two markets, Sydney and Melbourne, there are so many other markets around Australia, which I think you pointed out to us last week in the show.
Stephen: Yeah, look there are 175 towns in Australia, Kevin, that have a population of 10,000 or more, and we tend to forget about them as small, niche markets. And I think we discussed the Victorian strategy of creating house blocks, etc., further out, but improving infrastructure for connectivity. I think we’re going to see more and more of that.
Stephen: Look, you know, I think the property boom in 2019 will continue in parts of Australia such as Hobart, etc. Brisbane will stay stable. But I really think that some of those closer regional centres are what we’ve got to look towards for 2019.
Kevin: Yeah, that figure you mentioned of 175 towns in Australia with a population of 10,000 or more is a fascinating figure. And we featured that in a video with Simon Pressley from Propertyology in the show only a matter of weeks ago. They do some very interesting insights. And he is a champion for the regions, and I know that you mentioned that in last week’s show as well.
Kevin: Stephen, can I ask you about interest rates? ‘Cause you mentioned they’re going to remain reasonably stable. I think we tend to lose sight of the fact that that’s a good indicator about where the market is. And any increase in rates, although we might bemoan that fact, is already … would be an indication that the economy’s actually doing quite well.
Stephen: Well the economy is moving, yes. But I think what’s keeping the rates down is the fact that we’ve got very low unemployment currently, and low inflation, relatively. So inflation usually indicates that the market is starting to move. We haven’t seen that as yet. And we’re tied more and more to the international markets, particularly the US. We’re seeing some huge corrections at the end of 2018, and where they’ll move in 2019 will impact heavily on our economy, particularly with the trade war between China and the US.
Kevin: It’s going to be fascinating to watch because all the indicators as you just correctly pointed out, are good. Yet consumer confidence is down, and we can see that in the run to Christmas that we had late last year when the conversion rates at auction were so low, particularly in Sydney and Melbourne.
Stephen: But I think also with 2019 in the early stages, the upcoming election has a huge influence on attitude. And there’s a little bit of uncertainty. Although in some people’s mind it’s a lay down misere, Kevin, as to who’s going to win. But certainly lead-up to elections do tend to slow down some industries a little bit, but they, more than anything else, they do change sentiment.
Kevin: Stephen Sharry, who is the Executive Editor for Property TV. Propertytv.io, check it out. It’s a link on our website. Stephen, thanks for your time.
Stephen: My pleasure, Kevin.