No Change! RBA keeps the rate the same

While economists have been divided on whether a cash rate cut was to be expected this
afternoon, the odds for an alteration ahead of today’s meeting were the highest they’ve been
since the rate last moved in August 2016. 


However, the Reserve Bank of Australia has announced that the rate will remain on hold at
1.5%.


Given the election set to take place at the end of this month, it is less surprising that the RBA
would hold off on instituting a change. Both the government and opposition are promising
tax cuts intended to boost household finances, encourage spending and stimulate the
economy at large.


According to CoreLogic head of research Tim Lawless, “The flat CPI reading for the March
quarter wasn’t enough to drag interest rates lower, although the likelihood of a cash rate cut
over coming months remains high.”


“While inflation remains below the RBA’s target range, labour markets generally remain
relatively strong, supported by New South Wales and Victoria, and the decline in housing
values has lost some speed over recent months,” he added.
RBA Governor Philip Lowe said the board would be “paying close attention” to the labour
market at its upcoming meetings, hinting any sustained up-tick in unemployment could lead
to a rate cut.


“The inflation data for the March quarter were noticeably lower than expected and suggest
subdued inflationary pressures across much of the economy,” he said.
The statement revealed the bank does not expect inflation to get back up between its target
band of between 2-3 per cent before 2020.


“The main domestic uncertainty continues to be the outlook for household consumption,
which is being affected by a protracted period of low-income growth and declining housing
prices,” Dr Lowe said.
He said the house price adjustment was continuing. Prices dropped by 10 per cent last year in
Sydney and Melbourne, according to CoreLogic, with analysts predicting a similar drop this
year.


“The demand for credit by investors in the housing market has slowed noticeably as the
dynamics of the housing market have changed,” he said.
Economists and the business community have been divided on the wisdom of cutting already
low rates in the lead-up to an election.
The RBA has intervened in a federal election campaign to change borrowing rates only twice
in Australian history. It ultimately decided to keep the status quo despite the Australian
Bureau of Statistics reporting lower than expected retail trade figures.

Home owners will now have to wait until June to see if they will get relief from rising cost-
of-living pressures, as the central bank gives itself time to assess the impact of the policies of
an incoming Labor or Coalition government.

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Buying in Partnership

How would you like to double your deposit and double your income to buy your first property? Sounds pretty good doesn’t it? That’s the reason why many young homebuyers are now working together with a partner, friend or relative to break into the property market.

Although there are some excellent benefits to entering a property partnership, there are some pretty nasty horror stories out there too – so you need to make sure you protect yourself against the worst.

Make sure you have similar goals for your property purchase.

Do you both agree on how long you would like to keep the property for? Do you want to rent it out, or will you be living there together? Make sure everyone is on the same page before you enter into any contracts.

Buy with someone who is at a similar stage in life.

If you buy with a family member who has a baby on the way, you might be asking for trouble. Likewise, buying with a sibling who is too young to appreciate the importance of keeping up financial commitments could be just as much of a recipe for disaster.

Take a moment to check your financial compatibility.

You will be responsible for the loan if the other party becomes unable to pay, so take the time to have some open discussions about money, and make sure you are both equally committed to paying things on time and keeping track of the bills.

Decide if you want to be housemates.

If you plan to live together in the home, make sure you both agree about things that could cause arguments such as having pets in the house, allowing partners to sleep over, housework and other potentially touchy subjects.

Get Legal Advice.

Find out about your options legally if something was to go wrong, and decide whether you want to be Joint Tenants, or Tenants in Common. This might depend on whether you will pay an equal share of the deposit and loan repayments.

Create a formal agreement.

Get a formal agreement drawn up that covers as many issues as you can think of. Hopefully you won’t have any problems, but it might be helpful if you already agree on the solution ahead of time.

Property partnerships can turn into nasty legal battles when parties don’t agree on important issues, such as whether or not to sell the property. If you can thrash out some of these issues now you will save yourself a lot of worry in the future.

Keep records of spending.

Make sure you keep it even and try to keep records of who paid for what, just in case you have problems down the track.

Hopefully your property partnership will be a very positive experience, and if you follow these steps you should be well on your way to being a great team.

RBA holds cash rate at 1.5% yet again

The Reserve Bank has kept the official cash rate at a record low 1.5 per
cent for a 32nd straight month, as widely anticipated by economists.
The decision at Tuesday’s April board meeting means the cash rate has
not moved in 32 months.
The rate, which reflects what the central bank charges commercial banks
on overnight loans and influences all other interest rates, was last cut in
August 2016 and hasn’t been hiked since November 2010.

RBA announces March cash rate

In its second announcement of the year, the Reserve Bank of Australia (RBA) has announced
that the official cash rate will remain on hold at 1.5%
In a statement the RBA said the central scenario is still for the Australian economy to grow
“by around 3% this year”.
Speculation around the decision has intensified over recent weeks due to emerging trends
across the lending environment, including out of cycle rate increases from the banks, the
correction in the property market and rising arrears.
Mortgages more than 90 days in arrears climbed to a record 0.75% in December, according to
S&P Global Ratings. While five years ago only 39% of prime mortgage arrears were more
than 90 days overdue, the figure has since risen to 55%, with the largest hike witnessed in the
Northern Territory.
According to CoreLogic, a sharp slowdown in residential construction activity – coupled with
low retail trade – indicates that weak property market conditions are already spilling over to
the broader economy.
As such, it believes there is a “growing possibility” that rates could fall later this year.
“The performance of the housing sector over coming months should provide some clues
about future monetary policy decisions,” said CoreLogic head of research Tim Lawless.
“A further deterioration in the pace or geographic scope of declines could tip the balance in
favour of a rate cut later this year as the RBA becomes wary of the wealth effect moving into
reverse,” he added.
Last week the shadow RBA board advised the rate should remain on hold, as it has since
August 2016. According to a media release, its advice is based on the national economy
“currently not showing any clear direction”.

First Cash Rate in 2019 Announced

The Reserve Bank of Australia (RBA) has made its first cash rate announcement of 2019, at a time when most of the industry is still concerned with the fallout from the Royal Commission report.

To no surprise, the rate has remained on hold at 1.50%, where it has stayed since August 2016.

While RBA governor Philip Lowe has said the next rate move will be a hike, some experts are beginning to expect a rate cut could be the way forward.

CoreLogic head of research Tim Lawless said of today’s decision, “The hold decision was widely anticipated, considering a subtle uplift in CPI and steady labour market conditions, however financial markets are increasingly leaning towards the next move from the RBA being a cut rather than a hike.

“With CoreLogic’s January hedonic index revealing national dwelling values are falling at the fastest rate since the GFC, while Sydney and Melbourne’s rate of decline is now the most rapid since at least the early 1980’s, there is the potential the RBA may be becoming less comfortable with the performance of the housing sector. Add to this a consistent downtrend in dwelling approvals, weakening consumer sentiment and softer retail trade figures, and it looks like the household sector could start to weigh down economic growth.

“The weeks preceding the RBA meeting saw several smaller lenders pushing mortgage rates higher in response to persistently high funding costs, following an average 14 basis point rise in owner occupier mortgage rates since September last year. If we see mortgage rates rising more broadly, we might see the RBA become more willing to consider a rate cut in an effort to offset higher funding costs and support heavily indebted household balance sheets.”

John Kolenda, managing director of Finsure, said there was a likelihood of a post-election rate cut.

He said, “There is increasing pressure on the RBA to lower rates, particularly when you weigh up all the negative factors which includes the coming federal election, the response to the final report of the Hayne Royal Commission, the falling property market and external matters such as the US-China trade war and Brexit.

“There are just too many headwinds at the moment. You also have banks increasing their rates independently of the RBA due to cost of funding issues. Consumer confidence is the strongest economic indicator and as we can see from downturns in retail spending, consumer confidence is lagging.”

In his commentary around the rate decision, Lowe said, “The housing markets in Sydney and Melbourne are going through a period of adjustment, after an earlier large run-up in prices. Conditions have weakened further in both markets and rent inflation remains low. Credit conditions for some borrowers are tighter than they have been. At the same time, the demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed. Growth in credit extended to owner-occupiers has eased to an annualised pace of 5½ per cent. Mortgage rates remain low and there is strong competition for borrowers of high credit quality.”

 

How to negotiate on price and knock out the competition

All’s fair in love and war, and the same might be said for negotiating with real estate agents.

Whilst you want to get the best possible deal on your purchase, the agent is responsible for getting the best possible price for their client – the vendor.

Depending on how long you have been looking, you might be tempted to just pay the asking price to free up your Saturday mornings again.

But just think – how much sooner could you pay your loan off if you saved tens of thousands on the purchase price?

If you want to get the best deal on your property purchase, try these 6 tips:

  1. Focus on positives all around. The best way to negotiate is for every party to feel like they won the game in some way.

 

  1. Communicate clearly and develop a rapport with the selling agent. Don’t try to pick holes in the property.

 

  1. Do your homework. If you want to be able to negotiate on price, you need to have a good idea of what similar properties in the area have sold for in the past couple of months. You should walk through plenty of open houses and keep a close eye on the sold results for your area. (If the selling agent offers to give you a list of sold results, accept politely but do your own research because they will probably choose the highest prices to help in their negotiation with you).

 

  1. Don’t try to buy outside of your price range. If a property is advertised at $500k to $550k, and your budget is $450k, don’t waste your time. You will only destroy your credibility if the right property comes up with that selling agent in the future.

 

  1. Try to find out what the vendor’s motivation for selling. If they need a quick sale, or if they require a certain settlement period, this could help you to negotiate a deal that works for everyone. By including something in your offer that sweetens the deal, this could put you ahead of other buyers in the race.

 

  1. Timing is everything. Some would advise that it’s best to make the selling agent chase you as much as possible. But depending on the area, you might have a win by putting your offer in early. In areas with slow property sales, a vendor might be shocked to receive an offer in the first few days on the market. If you make your offer valid for only a day or two, the vendor will need to decide whether they wait and hope that someone else will come along, or whether they accept your offer for a quick sale.

The final cash rate of 2018 has been announced by the Reserve Bank of Australia.

RBA governor Philip Lowe announced the rate would be remaining at 1.5%.

As there is no cash rate meeting in January, this means the rate will have remained the same for at least 29 months in a row.

Experts and analysts were expecting the decision, citing low unemployment and wage growth.

While many over the last few months have begun predicting the rate might stay the same until 2020, the shadow board of the RBA has said there is “an increasing need” for a hike in the next six months.

CoreLogic’s head of research, Tim Lawless, said that “Considering the diversity of economic conditions, the hold decision comes as no surprise”.

Explaining what the RBA would be looking at, particularly in terms of the housing market, he added, “Labour markets are improving, but wages growth remains sluggish and inflation has softened.  It’s a bit harder to gauge the RBA’s view on housing market conditions, with the RBA continuing to call out weakening conditions in Sydney and Melbourne.

“CoreLogic data to the end of November highlighted that the Sydney market has already recorded a 9.5% decline in values since peaking in July last year and will likely surpass the previous record peak to trough decline of 9.6% which was set during the last recession between 1989 and 1991.

“Despite this weakness in the largest cites, dwelling values in Sydney remain 41% higher than they were five years ago, and Melbourne values are still 38% higher both of which show five year growth rates well in excess of most other capital city markets.

“Additionally, five of the eight capital cities have posted a capital gain over year to date however, from a macro view they have much less of an influence on the national figures than Sydney and Melbourne do.

“To date we haven’t seen the housing downturn impacting on household consumption or saving, however this is likely to be a key factor the RBA will be monitoring.”

 

NO rate change for the 27th Consecutive month

The Reserve Bank of Australia has announced its decision on the November cash rate. The rate would be staying the same at 1.50%.

The rate has now been the same for 27 consecutive months and many analysts believe it will remain at this rate into 2019 and possibly to 2020.

This announcement was mostly expected from the industry, with 98% of brokers believing it would remain the same, according to an industry survey.

The RBA shadow board also attached a 53% confidence that the rate would remain the same.

The RBA governor has previously said the next move of the cash rate will be a hike, however some analysts are now suggesting the environment at the moment could call for a decrease.

Michael Yardney, from Metropole Property Strategists, said, “The RBA must be a little worried with the current crisis in consumer confidence. If anything it may want to err on the side of caution and lower rates, but it is likely to take a wait and see approach.”

AMP’s Shane Oliver had said, “The fall in the official unemployment rate to 5% helped by above trend economic growth is good news.

“But the slide in home prices in Sydney and Melbourne risks accelerating as banks tighten lending standards which in turn threatens consumer spending and wider economic growth and inflation and wages growth remain low. Against this backdrop it remains appropriate for the RBA to leave rates on hold.”

 

How to negotiate in a softer housing market

Seller expectations are high but buyers want low prices – what’s to be done? Two real estate agents detail how to negotiate in a declining housing market.

After years of rapidly rising house prices, the recent slowdown took many people by surprise – not least those with a home to sell.

“For a while we had a situation where buyers were aware the market was dropping while sellers still assumed it was strong, so there was a big gap between their expectations,” says Anton Zhouk, Director of the Buxton Real Estate Group at Boroondara in Melbourne’s eastern suburbs.

“Now people have had time to adjust so, when it comes to negotiation, the gap isn’t quite so wide.”

Whatever the state of the market, every negotiation is based on the same premise – vendors want to receive the highest possible price while buyers want to pay as little as possible. Both, however, need to give careful thought to how they approach a negotiation when the market is in decline.

Be realistic

From a vendor’s point of view, it’s crucial that you price your property correctly from the start. The most incredible homes in the world won’t sell if they’re overpriced.

Jane Booty, Principal of Stone Hills District Real Estate in Sydney, agrees that vendors must be realistic.

“Some potential buyers are waiting for prices to fall even further so there are fewer actively looking,” she says. “They have more properties to choose from so it’s harder to convince them to pay a premium price. And the longer a property stays on the market, the less likely it is to sell at a higher price – buyers can look up how long it’s been for sale and will use that against you.”

She suggests that vendors try not to think in terms of losing money.

“Unless you bought in the last two years or so, you’re probably going to get a higher price than you paid,” she says. “And, of course, if you’re selling to buy, you’ll be paying less yourself. It can be more helpful to think in terms of the changeover price, rather than fixate on the price you may have been able to achieve a few months ago.”

Take offers seriously

If a property is on the market now, it’s there for a reason.

“This isn’t a time to be testing the market or selling a property if you’re not in a hurry,” Booty says. “If you do need to sell you should be prepared to take every offer seriously, even if it’s not at the level you were hoping for. At least enter into negotiations to see how far you can get your potential buyer to go.”

When buyers have the upper hand, presentation is particularly important.

“You need to be clear about the attributes of your home – the unique selling points that make it desirable,” Booty says. “It’s also worth spending some time and money on minimising anything that would cause concern. You don’t want potential buyers to go away with the impression that there are another five homes they’d be equally happy with.”

“In a softer market, it’s vital that you start by getting good advice on everything from pricing to presentation,” Zhouk says. “The right agent will also help you market the property effectively. This needs to be considered on a case by case basis – for example, advertising in print media may work well for some but, for others, it would be a waste of money.”

Be ready to act

As a buyer today, you’re well placed – but you shouldn’t be too complacent.

“If you see a property that appeals to you, it’s also likely to appeal to other people so you can’t afford to sit back and wait in the hope that the price will fall,” Booty says. “At least throw your cap into the ring and start the negotiation process.”

Zhouk believes that today’s buyers are in a fortunate position now that the market has settled – though no one knows for how long.

“The only way you can tell when the market’s hit the bottom is when it starts to come back up,” he says. “By then, you could be too late.”

Some tips to help get the best results from your negotiation

If you’re selling

  • Set a realistic price from the outset
  • Find a real estate agent you trust and act on their advice
  • Take extra care with presentation – you want potential buyers to fall in love with your property

If you’re buying

  • Do your research – be clear about a realistic market price
  • Have your finances in place, arrange a loan pre-approval
  • Let the agent know if you’re interested in a property
  • Don’t wait too long for a bargain – the market could turn at any time
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