With the 2010 end-of-year festive season well and truly in the rear view mirror, we’ve asked a few industry experts for their real estate market predictions for 2011.
Ross Greenwood, the Nine Network’s Business editor and host of 2GB’s Money News says:
“I really don’t think much will happen in the first half of the year. Perhaps by around May the mumbling will start that the Reserve Bank needs to raise rates again; and there will be evidence that parts of Europe (Germany especially and the UK as well) are starting to pick up.
The US also is showing signs of life, but our dollar should remain strong because of the amount of money the US has had to print for its Quantitative Easing.
The interesting thing to watch will be the banks. By mid-year most of them should be almost over their self-pronounced hump in rising borrowing costs. At this time expect term deposit rates to come off but also for out of cycle rate rises to ease off as well.
Barring a global economic catastrophe (which is hard to pick now, but Spain remains a worry and China must control its growth) 2010 will perhaps be as benign as we have seen.
All things being equal, rates should rise in the second half of 2011 because of the enormous capital investment in our resources sector underway, which will feed into economic growth and potentially inflation.”
AMP’s Chief Economist Shane Oliver says:
“We remain of the view that the RBA won’t start to tighten monetary policy until April next year at the earliest,” Mr Oliver told The Adviser.
According to Mr Oliver, the RBA is no longer under pressure to lift rates.
Inflation is presently under control and other data suggests the Australian economy is not improving too fast.
While dwelling starts fell sharply in the September quarter reflecting the earlier fall in building approvals and skilled vacancies fell in December, consumer sentiment edged up slightly and remains well above long term average levels, and new vehicle sales rose slightly in November, he said.
“While the NAB business survey showed that business confidence fell in November reflecting last month’s rate hike, business conditions actually improved slightly and both remain at levels consistent with reasonable economic growth,” Mr Oliver said.
Aussie’s Executive Chairman and founder John Symond:
Mr Symond believes interest rates will remain on hold until Easter, and possibly even until the middle of 2011.
“The RBA’s decision to lift rates on Melbourne Cup Day was a surprise and the subsequent move by the major banks to lift their rates higher than the 0.25 per cent has really done the some of the hard lifting for the RBA,” he said.
“Had that not happened, we could have seen the RBA increase by another 0.25 per cent in December.”
Mr Symond said he believed the RBA was comfortable with interest rates at the current level as evidenced by the Board’s comments released on December 21.
“Following the Board’s decision in November to lift the cash rate and the subsequent increases in lending rates, and taking into account the level of the exchange rate, monetary policy was judged to be mildly restrictive,” according to the Minutes. “Given the very high level of the terms of trade and the positive outlook for business investment, this policy setting was regarded as appropriate.”