housing market Archives

Quarterly Economic Update: October-December 2024

14 January, 202521 January, 2025 Updated on21 January, 2025 Economy, Finance, Investing

The final quarter of 2024 reflected a mixed economic landscape. While consumer spending and equity markets showed resilience, persistent inflation, cost-of-living pressures and a cooling housing market have tempered optimism. Interest Rates – Will They Rise or Fall? Inflation in Australia showed signs of easing during the final months of 2024, with the trimmed mean inflation rate falling to 3.2% in November, down from 3.5% in October. The RBA held the cash rate steady at 4.35% during its December meeting, emphasising the need to maintain current policy settings to bring inflation back within the target range over time. Monthly consumer price index (CPI) data for November indicated a 2.3% rise in the 12 months to November 2024, up from a 2.1% rise in October, according to the Australian Bureau of Statistics. Economists remain divided on whether further rate hikes will be necessary in 2025, with some predicting a rate cut as early as February. Cost of Living Pressures Continue Total spending across the Australian economy increased by 1.5% in the September quarter of 2024 compared to the 2.2% in same period of 2023. Essential spending has decreased in the same period due to a decline in petrol prices and various energy relief programs. Discretionary spending increased by 0.8% compared to the same period in 2023, indicating potential signs of recovery. However, data shows that young Australians cut back spending 2% over the past year, while those aged over 60 increased their spending by 3.9% and those over age 70 increased their spending by 7.7%. Black Friday Means Big Spending Australians spent approximately $7 billion in November’s Black Friday and Cyber Monday sales – a 4% increase compared to the same period in 2023. This rise was driven by strong demand for electronics, apparel, and household goods. In-store shopping experienced a notable resurgence, with physical stores accounting for a significant portion of the sales growth. Is the Housing Market Finally Slowing? Australia’s housing market experienced a slight downturn, with national home values recording their first decline in nearly two years. CoreLogic data for December shows a 0.1% decrease in dwelling values, driven by higher interest rates, reduced borrowing capacity, and increasing cost-of-living pressures. The supply of new housing remains constrained, exacerbating affordability challenges. Global Outlook for 2025 Globally, the economic outlook remains resilient, despite significant risks. According to the OECD, global growth is expected to stabilise at around 3% in 2025 and 2026, underpinned by robust performance in emerging economies and gradual recovery in advanced economies. Geopolitical tensions, including conflicts in Ukraine and the Middle East, continue to pose challenges to supply chains and energy markets. Persistent inflation in key regions and the potential for monetary tightening remain areas of concern. For Australia, economic ties with China and commodity exports are key factors influencing the outlook, especially as China’s economic activity shows signs of stabilising. Trump’s Inauguration Looms The inauguration of the Trump administration on January 20th has prompted considerable speculation about potential economic implications. Key areas of focus include trade policy shifts, tax reforms, and geopolitical stability. Early indications suggest a renewed focus on protectionist policies, including higher tariffs on imports from key trading partners. For Australia, this could mean increased challenges in sectors like agriculture and mining, where access to the US market is critical. Stock Market Outlook Australian equities ended the year on a positive note, buoyed by easing inflationary concerns in the US and hopes of a soft landing for the global economy. The ASX200 recorded modest gains in December, aligning with broader global trends. However, analysts caution that 2025 may bring volatility, driven by geopolitical risks, fluctuating commodity prices, and uncertainty in monetary policies. The information provided in this article is general in nature only and does not constitute personal financial advice. 

Fixed rate mortgage expiring… Now what?

10 May, 20234 May, 2023 Updated on4 May, 2023 Budgeting, Economy, Finance

If your fixed interest rate expiry is coming up, you might have started to think about what happens next and what action you need to take. Or you might be sticking your head in the sand and avoiding the topic entirely. Be warned! The worst thing you can do is take no action at all. If your fixed interest period is due to expire, then it’s time for a review of your finances – Revisit your budget A fixed rate expiry will mean a change to what is often one of our biggest expenses – the home loan repayment. In a rising interest rate environment, this likely means a bigger expense you will need to allow for. By revisiting your budget, you can make sure you can afford the new home loan repayment amount, or adjust your spending where needed. Know your financial situation Your financial situation is going to impact what options are available to you and what options might be best for you. If there’s been recent changes to your income position such as job loss, income reduction or maternity leave, for example, this may impact your ability to refinance your loan. As a result, you may have to stick with your current lender on terms you may not be happy with. If you have surplus cash flow that you want to use to reduce debt, a variable rate loan might be more appropriate so that you’re not as limited with the ability to make repayments. Alternatively, if cash flow is tight, you might appreciate the stability of a fixed rate loan, and knowing your repayment amounts won’t increase during the fixed rate period. By having a good understanding of your current financial position and future goals, you can determine what your needs are and what the best strategy is for you moving forward. Look at what the market is doing One of the main factors to consider when deciding between a fixed and variable interest rate is the current market. While no one has a crystal ball, it’s important to consider what is happening with the economy, housing markets and interest rates. Are interest rates trending up or down? And what might this mean for both fixed and variable interest rate loans? Get clear on your options When your fixed interest term expires, you will need to choose between either re-fixing your loan for a period or switching to a variable interest rate loan. This is also a good opportunity to review your existing loan provider against other loan providers, to ensure you are being offered a competitive rate. With your market research in hand, it’s time to call your existing lender to request a rate review. You can let them know you are considering refinancing your loan and want to know what the best they could offer is. It might be time to switch lenders if they’re not prepared to offer you a competitive rate. The information provided in this article is general in nature only and does not constitute personal financial advice.

Economic Update: July-September 2021

7 October, 20217 October, 2021 COVID-19, Economy

COVID here to stay The third quarter of the calendar year brought with it the third and by far the biggest wave in COVID-19 infections. Largely restricted to NSW and Victoria the outbreak was driven by the highly infectious Delta variant. Such was its speed of spread it forced a change in strategy from one of elimination to learning to live with the virus, supported by a massive vaccination campaign. By quarter’s end vaccination rates were closing in on key targets that will allow a slow and selective lifting of the severe lockdown conditions that have prevailed for months. Time to chill You know Australia has a housing problem when the head of one of the big banks, in this case Matt Comyn at CBA, calls for action “sooner rather than later” to stop the property market overheating. This was on the back of CoreLogic data showing house prices in Melbourne and Sydney rose 15.6% and 26% respectively over the 12 months to August. The International Monetary Fund (IMF) also called on Australian regulators to cool the market. Don’t expect this to happen through the usual instrument of increased interest rates. Rather, look for reduced lending in specific sectors, such as investors, higher deposit requirements, or testing loan serviceability at higher interest rates. Pop goes iron ore Iron ore’s price bubble eventually popped as China instructed its steelmakers to cut back on production. Over the quarter the ore price fell 45%, with major miners taking an equivalent hit. BHP, Rio and Fortescue saw their shares tumble 33%, 26% and 44% respectively. Hot topic In August the Intergovernmental Panel on Climate Change (IPCC) released its latest report. It warned that “unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to 1.5°C or even 2°C will be beyond reach”. The report paints a grim picture of what that warmer world will look like and returned climate change to the front pages of the world’s newspapers. The numbers Equity markets experienced a bit of a rollercoaster ride over the quarter. All the major indices posted record highs, but most ended up within 1% of where they started. The Aussie dollar also had a volatile quarter, trading between 71 and 75.4 US cents and finishing at 72 cents. It was a similar story against the other major currencies. In both cases the late-quarter sell-offs were blamed on expectations of higher US interest rates. On the radar Many of the world’s leaders will come together in Glasgow at the end of October for the 26th UN Climate Change Conference (COP26). If they heed the warning from the IPCC, and if they agree to take the necessary steps to limit warming to 2°C (and preferably 1.5°C), it will set the scene for a dramatic economic transformation, with huge opportunities for those who can sort the winners from the losers. Of more immediate concern, Chinese property company China Evergrande appears to be on the brink of collapse. Heavily indebted to the tune of US$300 billion, if it is allowed to fail it is likely to have global ramifications, not the least for Australia. China’s construction boom has been a huge driver of demand for our iron ore. The information provided in this article is general in nature only and does not constitute personal financial advice.

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