New year, similar trends
It should be steady as she goes for the banks, share market, property market and the federal government in 2017, predicts Graeme McDonald
Well, a Happy New Year to you all. In many cases, you are only a week or so from the start of the school year. I am guessing right now your thoughts are on last-minute maintenance, timetable scheduling, or wondering why one of your drivers hasn’t returned your call about when they get back from their summer break. Ah, the joys of being a business owner, but we all know we wouldn’t have it any other way.
So rather than run through a whole heap of technical stuff about the economy and negative growth and all the stuff that pretty much brings tears to our eyes when we read it in the paper, even if I do put a bit more of a layman’s spin on it, I thought I would do a bit of crystal balling to see what’s in store for us this year.
So here we go. Firstly, the Reserve Bank will do very little that will impact us this year. It may, at some stage, feel pressured into a rate drop, but I think that is unlikely. That said, even if it did drop the rates .25 per cent as it is known to do, little or none of the rate drop will ow through to the consumers.
Banks are no longer able to continue to pass on rate decreases as, despite what you may think, their cost of funds is higher than what the RBA cash rate is. And, as many of you are probably shareholders, you will still expect a dividend, and that money has to come from somewhere – banks still need to make a prot.
Secondly, the share market will continue, as it has done forever, to rise and fall based on what the mood of the market is on the day.
I think we will see the indicators move this year and the market trade more often between 5400 and, say, 5700. The previous 12 months saw it working between a range of 5100 to 5500. This will mean that, in the main, we will see a rise in the value of shares.
The share market will see this growth as people look for alternatives to generate income and returns as the property market continues to grow, and put some people out of the investment space.
Speaking of property, the capital city property market will continue to see growth as people still chase the dream of being a homeowner. Quality established suburbs and houses will still grow in value, while outer suburbs will still be affordable.
The apartment market is a bit of an unknown, with large numbers of these to hit the market in the next 12-18 months, creating a bit of a glut in this area. Banks have tightened up on the apartment space by increasing their deposit requirements and having instructed valuers to value conservatively when looking at sale contracts. While on property, banks are tightening up on their lending to investors by increasing rates and lowering lending margins.
To be honest, I think it will be an okay year. We shouldn’t face any great disasters. The federal government will still be a circus as all the independents clamour for some airtime and chest-thumping space. Some states will probably fall into that similar space, as they seem to lurch from one disaster to another.
Bottom line, I think, is to smile every day, do your best, and this time next year we should all be in a better place.
Anyway, enough from me. If you would like to investigate anything raised here or discuss any other issue, please feel free to give me a call, I’m available throughout the year.
This time next year we should all be in a better place