Time to be optimistic
It’s worth looking back at the trends of 2017 to get an idea of what’s in store for the new year, writes
Well, happy days. It’s 2018 and a very happy new year to you all. We say it every year – how fast did that year just go? My theory on time is simple. Each year becomes a smaller part of our existence. At age five, one year would be about 20 per cent of your life, while at age 50 it would only represent 2 per cent. It’s what I go with anyway.
By the time this magazine hits your desk, in the main you will be only about 7-10 days from starting the school year again. Ah, the thoughts of all those happy smiling faces, bounding onto your buses with an unbridled enthusiasm for life and education is bringing a smile to your faces as you read this. Again, it’s what I go with.
For this article, I thought I would look back at last year’s January article and see how my crystal ball performed.
Last year I suggested that interest rates would stay on hold. The Reserve Bank has done that, and kept official interest rates on hold.
The banks have generally followed suit, with the exception of the investment loan market, where there has been some tightening up of the lending. Most banks have now increased their rates and requirements to customers in this market place.
In general, banks are now enforcing the deposit requirements and have essentially stopped lending in this space on an interest- only basis. You can still get interest- only but it is at a significantly higher rate than before. For 2018 I don’t see much change to this. I think for most, if not all, official rates will remain on hold. The banks will tinker around the edges posturing for market share but, in the main, with a banking royal commission starting this year, the banks will be keen to keep themselves out of the limelight.
It appears I may have got this a bit wrong. I predicted the market would trade between 5400 and 5700 which, for about nine-and-a-half months, it did. In the last couple of months it has headed north of 6000 on a regular basis. I think this is part of the cycle as people cash out of property with the uncertainty of the property market.
I think we will again see this cycle continue, but without it smashing any records at this stage. At the time of writing, the market closed at 5999.
I think ultimately at the end of 2018 the market will be trading between 6000 and 6300. There will be highs and lows, but I would think this will be a solid year if that’s where we end up.
It had been a pretty solid year for property in the main. Clearance rates in Melbourne as a whole have been around 85-per- cent-plus in recent weeks but that’s not a surprise. Inner Melbourne is still posting strong rates, while outer mortgage belt areas are slowing as the level of stock is outstripping demand in some cases. This is reflective across the country in the main capital areas – pockets of strong growth and areas of weakness. Perth/ WA is outside all this as it still struggles to find a base line following the madness of the mining boom.
Property will generally still represent a good investment if you are prepared to hold it for a medium-to-long time. The days of buying now, adding a coat of paint and reselling quickly for a good return are over. While we are on the property market, don’t mention apartments. Yep, don’t talk about them.
Finally, I think we should see the economy hold up okay this year, albeit at a slower growth rate than 2017 as the property market that has driven the growth starts to readjust. The growth, small as it may be in 2018, should be more sustainable as a result, being that it will be true growth.
Well, enough from me for this month. If you have any questions or you want to discuss any matter, please feel free to drop me an email or give me a call, I’m always happy to listen and give you my opinion.