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As savvy property investors it’s important to keep on top of events and changes which can have an impact on our property investments. There are so many analyses, opinions and articles about investing in property out there that it can be tough trying to keep up with what’s happening in property.
I’d like to take a moment to share some of the more interesting articles I’ve come across this week.
Property Observer’s Jonathan Chancellor compares the Sydney market to a popular children’s bedtime story in his article titled “Sydney’s property market is a bit like the porridges of the three bears in Goldilocks – too hot or too cold and, for some, just right”.
In his insightful article, Chancellor discusses the fact that the auction market is not the “end all, be all” in determining a market’s viability:
“It’s often assumed the auction market is representative of the whole Sydney market. But the auction market is quite a different to the the marketplace that utilises the private treaty method.
This is not to say that auction results – both individual and regional – are not clear pointers of market strength and price direction.
The auction market is always pricier than the regular market because of the type of home that suit auction and also the ensuing competitive edge that the auctions engender.”
Peter Samas, in his article titled “Why Aren’t the Banks Passing on The Full Rate Cut?” published on streetnews.com.au, describes the reasons behind the seemingly haphazard moves by Australia’s financial institutions.
“Since the GFC and the US sub-prime mortgage crisis, such international securitisation loans are no longer considered a safe investment and this has affected the way banks make decisions on their official mortgage interest rate. In order to fill the gap left open by risky securitisation loans, many banks and lenders turned to deposits. These deposits include term deposits, transaction accounts and savings accounts and in recent times banks have battled each other in an effort to secure such accounts from consumers.
This explains why we have seen interest rates on savings accounts and term deposits skyrocket. Of course, this was great news for those with no mortgage and a bit of cash behind them, such as retirees, but there were two sides to the coin. Payment for the high interest rates on deposits needed to come from somewhere and many banks and lenders financed this cost by choosing to not pass on the full RBA rate cut to their home loan consumers.
In addition, just like we borrow from the banks, they themselves borrow from each other; and when there was a heighten risk of sovereign default (such as what has occurred post-GFC in Europe and the US), the default risk on the bank’s own borrowing capacity also rose. To compensate for this risk, the banks increase the interest rate they charge each other, which in turn limits their ability to move as freely as the RBA on rate cuts.”
Have a great weekend, and if you enjoyed this list, please share it with your friends by clicking a social link button to the left of this article.