It’s hard to know where to turn these days. A number of top stories were released this week that provided an insight into our economic and property markets. Banks were up, rates were down. That’s all well and good some say, but without the driving force of confidence, are we doomed for decline?
This week we saw the RBA drop interest rates by a full 0.5% – normally great cause for relief.
On the same day this week ANZ announced a record first half profit of close to $3 billion. As pillars of the community this should make us all rest easy given that they took the brunt of things throughout the global financial crisis…
So with record profits still being taken by the banks, will they have the compassion to pass our beloved rate cut on to the people? Will we have some respite from the difficult times at hand?
Well the answer appeared to be in another article on the same day by Adele Horin in the SMH.
She referred to a study conducted by the National Centre for Social and Economic Modelling at the University of Canberra showing that our standard of living has actually improved since 2004 and income has more than kept up with prices.
Although petrol prices are high, they’re not as expensive as North America, and even though the costs of basic necessities have risen, the costs of discretionary items such as computers and televisions have fallen dramatically to balance out the equation.
In essence, we’re actually a lot better off today than we have been in the past so what do we have to worry about?
Well, that seems to be the problem. Another article (on the same day) by Andrew Wilson stated that it’s not the interest rate levels that are the problem, it’s our confidence. Drop the rates all you like, if we don’t feel confident that the (global) economy is in good shape then we’ll be reluctant to go forth and spend no matter the financial conditions.
Reading the papers it can be hard to make sense of it all. While the banks are now more brazen in dictating lending rates, it shouldn’t make much difference as we’re all better off than we were, if only we’d pick our head up and stop feeling sorry for ourselves.
As an agent in the market everyday, I can tell you that not everyone is lacking confidence though. In fact, quite the opposite. We’re now seeing a surge in buyer optimism that is pushing the price far beyond what we have imagined, and the statistics were released this week to back it up.
APM released figures for the last quarter showing that Sydney unit prices had indeed risen by 2.5%. On a $600K property that’s about $15K in 3 months.
Watching the property prices myself I can concur with this rise. We have seen many properties that have gone well beyond their valuation price in the last couple of months, more so than ever before.
This sentiment of growing confidence has yet to be noted in the media yet. At this stage it’s far too small to be noticed. But once the groundswell begins, it will be those investors who have had the foresight to read the numbers and use their head rather than listen to those around them and rely on how they ‘felt’.