Andrew Bell’s Market Update: Interesting Challenges Ahead

MARKET WRAP
Issue 4   |   February 16th, 2017  |  Interesting Challenges Ahead

The Event continues to roll out sales on a daily basis. Some of the negotiations did not conclude with a sale on auction day, but more than 30 properties have sold just in the last 10 days. There are also plenty more in final stages of negotiations. A stunning result. I will be able to report on our commercial results very shortly as well.

A couple of interesting things have surfaced, that helps to shape the direction of 2017 for the real estate market. The economy and GDP is one of the five fundamentals that drive the real estate market.

WILL WE SEE A RISE IN INTEREST RATES?

A bit surprise, that nobody saw coming, was the largest trades surplus on record, particularly off the back of a surge in coal and iron ore prices. This certainly puts to bed the risk of a technical recession and perhaps increases the risk of a rise in interest rates later this year. The surplus was $3.51 billion and last week they also announced that the November surplus was revised upwards to just over $2 billion. These certainly make for

The surplus was $3.51 billion and last week, they also announced that the November surplus was revised upwards to just over $2 billion. These certainly make for interesting challenges for the Reserve Bank. The lower Australian dollar stimulated the trade boost;

The lower Australian dollar stimulated the trade boost; however, the dollar has risen off these great results which actually would mean, in most cases, a temptation to drop interest rates to weaken our dollar. Although, if the economy starts to get a real kick on they will want to move out of these record low-interest rates. It is going to be an interesting juggling match.

UNEMPLOYMENT ON THE RISE

Unemployment is one of our other fundamentals of real estate. A January jump in the number of job advertisements weighs to the view that the economy remains strong. Job advertisements on the internet and in newspapers rose by the seasonally adjusted 4% in January. In fact, in the year to January, job advertisements were up 7.1%. It will be very interesting to see how this impacts on unemployment, which continues to be debate about what are the true unemployment levels

DOWNWARD TREND FOR CONSTRUCTION

The economy has also been heavily driven by the construction industry. It took up some of the slack when the mining boom ended but of course, it can’t continue at record levels indefinitely.

A report out of December stated by the Housing Industry Association says that they confirm that the peak in this current cycle has now passed and that there was a downward trend in building approvals. That also means we are protecting ourselves from over supply. They suggest the building approvals peaked in July 2016 and that by December just past they were 18% lower than that peak.

All in all – a reasonable level of positive news off the back of fears in late 2016 that our economy was slowing and heading towards a technical recession. As we all know we could be doing better, however, we are still one of the better-performing economies in the world, although there is no room for complacency.

I look forward to catching up with you in a fortnight’s time.

Best wishes for now.

Kind regards,
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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