Australia’s low interest rate environment could be coming to an end with more banks revising their predictions following the Reserve Bank of Australia’s (RBA) neutral bias forecast.
The property sector has felt the benefits of record low rates which remained at 2.5 per cent at the RBA’s sixth straight meeting in early March. However, the RBA has given no indication rates will continue to move lower with this week’s release of the meeting minutes affirming the cash rate looks to be set for a period of stability.
Westpac Banking Corporation
(ASX:WBC) has this week revealed it no longer expects rate cuts this year and is instead forecasting rates to remain on hold. Westpac has however maintained its forecast for rates to rise by 25 basis points in the September and December quarters of 2015.
Macquarie Group Limited
(ASX:MQG) has also revised its forecast for the key cash rate. Australia’s biggest listed investment bank now expects just one 25 basis point interest rate cut this year in the third quarter from an earlier forecast of two reductions.
New home lending stays strong
Lending for new homes got off to a strong start at the beginning of 2014. The Australian Bureau of Statistics reports owner occupier loans for the construction of new dwellings rose 5.8 per cent in January. Owner occupier loans for the purchase of new dwellings paused from five months of gains to ease 1 per cent in January.
The Housing Industry Association says, “The overall January result is a promising signal that recently improved conditions in the residential construction sector will continue into 2014.” While Westpac Banking Corporation
(ASX:WBC) has noted January data is less reliable as the market is ‘off-season’ the bank still believes market activity remains relatively strong with auction markets picking up and positive price momentum.
Macquarie interest rate outlook
Macquarie Group Limited
(ASX:MQG) Global Head of Economics, Richard Gibbs tells FNN why Macquarie has just adjusted its RBA interest rate forecast for 2014:
“We’ve adjusted the interest rate forecast to only one further rate reduction for 2014, I suppose in response to the December quarter national accounts which showed that the economy looked like it actually stabilised in the December quarter. So, the gap in growth that we had been concerned about is likely to be much less in magnitude than we had first thought.
Secondly, we are not convinced that the May budget will be a shock and awe budget and that we will have a substantial amount of fiscal drag, which had been a concern to us.
And thirdly, really the labour market is a lagging indicator. We do expect we are going to see a further rise in unemployment but it may well be occurring in an environment where business and consumer confidence is improving and on the up and up. So, therefore the environment to which that occurs is not as critical for interest rate settings.”
Australian auction results
Sydney recorded an 82 per cent clearance rate from 637 properties for auction
Melbourne posted a 74 per cent clearance rate from 932 properties for auction
Brisbane booked a 38 per cent clearance rate from 93 properties for auction
Adelaide saw a 57 per cent clearance rate from 52 properties for auction
Commercial property sector
Charter Hall Group
(ASX:CHC) has bought a 50 per cent stake in an centrally located Adelaide office building for about $30 million from Aspen Group Limited
(ASX:APZ).
Real estate investor DEXUS Property Group
(ASX:DXS) is set to gain trading profits of $4.1 million after selling two Queensland industrial properties located in Brisbane’s south west for $62.5 million.
Prime Financial Group Limited
(ASX:PFG) has launched a new commercial property fund which will target a diversified portfolio of industrial properties in major Australian East Coast markets.
Real Estate Corp Limited’s
(ASX:RNC) $60.7 million off-market takeover bid launched by unlisted real estate developer Little Group has been declared best and final by the suitor and is expected to close on April 2, 2014.
