Market Update
As always, macro conditions have a significant effect on buyer sentiment and must be taken into consideration in tandem with local area conditions. As was widely expected, the Reserve Bank (RBA) decided to once again leave the official cash rate on hold last week at its monthly board meeting. After the announcement, the Australian dollar sank to a one year low of under 95 US cents.
In a Herald Sun article, head of Australian Retailer’s Association Russell Zimmerman said the lack of an October rate cut was a blow for the retail sector given how bad the year has been. A Sydney Morning Herald article reported that a rate cut is now almost certain to come on Melbourne Cup day. A separate Herald article said economists are still divided with the most bullish, Westpac, still predicting rates will fall by 1% over the next twelve months. At the other end of the spectrum, stockbroker ICAP is predicting rates to rise by 1% over the same time frame.
Regardless, a Herald Sun article later in the week said the savings from any rate cut will be wiped out by soaring petrol prices, with unleaded fuel now costing 30 cents a litre more than it was this time last year. The price is expected to continue rising in the lead up to Christmas.
Overseas, Greece may be bankrupt within weeks, with news.com.au reporting the Greek Government has conceded it cannot meet the deficit targets agreed as part of the recent bailout agreement. According to the article, a Greek debt default will ruin the balance sheets of many European banks, leading to more financial chaos. Stock markets around the world reacted harshly to the news, suffering further heavy falls.
Locally, the latest RP Data/Rismark House Price Index shows Australian home prices continued to fall in August in all capital cities apart from Darwin, which posted a gain of .2% and Sydney, where prices remained flat. RP Data’s latest finalised auction data showed clearance rates in Sydney and Melbourne have fallen to just 44% and 47% respectively, while Brisbane and Adelaide cleared at 25% and 56%. Volumes in other capital cities were too low to yield meaningful averages.
Author: Mark McLeod – Ray White CEO Growth
