Interest rate changes no longer have an impact on buyer decisions. That’s the underlying theme being expressed by a number of commentators after yesterday’s RBA surprise slashing by 0.5 points. Commsec analyst Craig James pointed out “we do know that there’s plenty of bargains out there for cashed-up buyers. But the missing ingredient is basically confidence”. Even industry veteran John McGrath sneses we have left the traditional interest rate link to buyer activity in the past. Increasingly buyer activity has become subject to a larger group of global influences which gives reason for us to reflect on the theory of compressed market shifts. Given the uncertainty of Europe, most recently Spain’s difficulties, and the disjointed recovery in the U.S. as they head into an election period culminating in our own fractured domestic political landscape all of which form part of the daily soup served up to home buyers, is it any wonder there is reason for a lack of confidence in the market? That being the case, what will it take to restore security to buyer perception? Welcome to the “NEW” normal.
Interesting reading on the direction of interest rates from two of the big four with the RBA due to meet this week. Bill Evans suggests 50 bps drop by September (although uncommitted on when the drops will occur, certainly not this month) while Commsec expect a single cut in May only. With the Federal Government firmly standing by its budget surplus position, some would say a relatively small impact of previous rate cuts on construction, it does place the State Governments in a position to ramp-up assistance to the building industry.
Some great research produced by Simon Hemphill from Savills indicating the number of people settling permanently in Australia hit the highest levels in 3½ years in January. As Craig James chief economist from Commsec says, “Population is power, lifting economic growth and momentum.”