Aris Dendrinos Market Update 16/06/2016
It was fascinating to see the focus return to interest rates in recent months.
After a prolonged period of inactivity by the Reserve Bank, the unexpected low inflation figures put added pressure on the need to further stimulate economic growth or to be more precise spending.
And so it passed with the May 0.25% cut taking us below the 2% mark overall which is amazing.
We are now entering unchartered and dangerous waters. There is a point believe it or not, where in my opinion rate levels can be negligible. By that I mean they go so low that the impetus to act or borrow money is minimal at best.
This is a situation we want to avoid at all costs. If borrowing money is viewed as so cheap and easy but yet still not acted upon we could quickly reach a point where our currency loses its value domestically. You only have to look at Japan where over the past 35 years they have experienced several extended periods of deflation in which the entire nation hardly spent and the banks almost literally gave money away.
Beyond the economics, there is also a heavy cultural influence in this phenomenon. Unlike such a traditional and Ancient society as Japan our western democratic model is founded on such modern principles as the free market and consumer spending. So whilst it is highly unlikely that Aussies will keep their hands in their pockets en masse when it comes to the acquiring of material possessions if it does head too much down that path we will be in new territory for our economy.
I know - what, a real estate agent not wanting rates to go down anymore. What's wrong with him?!
The problem is that if you're a buyer and it isn't too difficult for the bank to throw another $50,000 at you the temptation to spend it will increase thus leading to prolonged periods of price growth on property.
Ironically it is usually when rates go up that homes become more affordable to purchase.
We have a fantastic property going under the hammer this Saturday (18/6/16) that you are all invited to attend.
3.15PM - 38 Edward Street Marrickville - 3 B/R freestanding Federation + studio
The property will be available to inspect 15 minutes prior and we will also be streaming the Auction live if you are interested. Simply click on the link https://www.facebook.com/randwmarrickville
That's it from me. Have a great weekend and I'll see you next Thursday.