<p>Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.</p>

<p>Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;</p>

<p>David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;</p>

<p>“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;</p>

<p>[smartcode_project:default project_id=110291 project_image_fid=302785]</p>

<h2>Affordable product leads, premium demand remains resilient</h2>

<p>Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;</p>

<p>Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;</p>

<p>At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.</p>

<p>Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.</p>

<p>Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;</p>

<p>[smartcode_project:default project_id=148957 project_image_fid=364102]</p>

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

<p>Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.</p>

<p>David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.</p>

<p>“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;</p>

<p>Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.</p>

<p>[smartcode_project:default project_id=108869 project_image_fid=317905]</p>

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

<p>While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;</p>

<p>Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;</p>

<p>However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.</p>

<p>Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;</p>


Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<p><a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.</p>

<p>The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.</p>

<p>Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.</p>

<p>“Brisbane was the right step for Sammut,” Sammut said.</p>

<p>“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" /></p>

<p>Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.</p>

<p>The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.</p>

<p>“We are DA approved now which is very exciting,” Sammut said.</p>

<p>“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" /></p>

<p>Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.</p>

<p>“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.</p>

<p>The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.</p>

<p>“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”</p>

<p>The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.</p>

<p>The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.</p>


Sammut secures approval for debut Brisbane apartment development in Toowong

<p>Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.</p>

<p>Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.</p>

<p>The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.</p>

<p>“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.</p>

<p>“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.</p>

<p>“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”</p>

<p>The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.</p>

<p>“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”</p>

<p>From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.</p>

<p>“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”</p>

<p>The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.</p>

<p>“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.</p>

<p>Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.</p>

<p>“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.</p>

<p>“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”</p>

<p>The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.</p>

<p>“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.</p>

<p>Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.</p>

<p>&nbsp;</p>


Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

<p>Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.</p>

<p>The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.</p>

<p>It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.</p>

<p>With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.</p>

<p>“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.</p>

<p>“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" /></p>

<p>GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.</p>

<p>“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”</p>

<p>Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.</p>

<p>“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" /></p>

<p>&nbsp;</p>

<p>One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.</p>

<p>Green praised local policy settings.</p>

<p>“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”</p>

<p>One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.</p>

<p>“The way we will be able to achieve economies of scale is through size,” Green added.</p>


One Living enters Sydney's new apartment market with Northern Beaches site acquisition

<p>It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.</p>

<p>Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.</p>

<p data-end="882" data-start="690">"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.</p>

<p>The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.</p>

<p>Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.</p>

<p>The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.</p>

<p>WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.</p>

<p>With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

Interest Rates

<html><body>
<p>Governor Glenn Stevens' July Statement:</p>
<p>At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.</p>
<p>Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China's growth slowed a little earlier in the year but remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined.</p>
<p>Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain low. Emerging market economies are once again receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates over the period ahead.</p>
<p>In Australia, recent data indicate somewhat firmer growth around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on stream; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.</p>
<p>There has been some improvement in indicators for the labour market in recent months, but it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably. If these and other domestic costs remain contained, inflation should remain consistent with the target over the next one to two years, even with lower levels of the exchange rate.</p>
<p>Monetary policy remains accommodative. Interest rates are very low and for some borrowers have edged lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.</p>
<p>Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.</p>
<p>In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.</p>
</body></html>

po-LsXgBTHBmX

Strong expansion in housing construction underway: Glenn Stevens' July statement

<html><body>
<p>Property investors feel the effects of interest rate changes just as much as home owners do, although that impact may be disguised in the short-term by negative gearing.</p>
<p>Investors receive a tax deduction on mortgage interest expenses, so paying more interest on an investment property loan may not seem as bad as when rates rise on the loan that funds the family home. A bigger interest bill means a bigger tax deduction, after all.</p>
<p>But interest rate increases do hit the bottom line of investment returns. Higher costs, without accompanying rent increases, reduce the income the investor receives each year. This means the investment must achieve a higher capital gain to produce the same total return.</p>
<p>Accounting firm, HLB Mann Judd has crunched some numbers for <em>Property Observer</em> that demonstrate the effect of interest rate rises on a fairly typical property investment.</p>
<p>The property in the example is worth $465,000 and achieves a weekly rent of $400. An investor buys the property with a loan of $418,500 (having paid for 10% of the property in cash). The mortgage is taken over 25 years with monthly repayments. In the example, the investor has decided to repay the principal as well as interest.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Loan details</h5>
</td>
<td valign="top" nowrap width="130">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Property Value</h5>
</td>
<td valign="top" nowrap width="130">
<h5 style="text-align: right;">$465,000</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="130">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Loan Amount</h5>
</td>
<td valign="top" nowrap width="130">
<h5 style="text-align: right;">$418,500</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Rate</h5>
</td>
<td valign="top" nowrap width="130">
<h5 align="right">5.1%</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Term of Loan (years)</h5>
</td>
<td valign="top" nowrap width="130">
<h5 align="right">25</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="130">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Repayment Frequency</h5>
</td>
<td valign="top" nowrap width="130">
<h5 align="right">Monthly</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">The property generates an annual rental income of $20,800 and there are no periods of vacancy throughout the year.</span></p>
<p>Annual expenses total $6,306.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="177">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="151">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5> </h5>
</td>
<td valign="top" nowrap width="151">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5>Rental income (at $400/wk)</h5>
</td>
<td valign="top" nowrap width="94">
<h5>$20,800</h5>
</td>
<td valign="top" nowrap width="208">
<h5>Strata Levies ($470/qtr)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,880</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Council Rates ($270/qtr)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,080</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Water Rates ($160/qtr)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$640</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Management Fees (5.8%)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,206</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Repairs &amp; Maintenance</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,000</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Landlord Insurance Premium</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$500</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5> </h5>
</td>
<td valign="top" nowrap width="151">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5>Total Income</h5>
</td>
<td valign="top" nowrap width="94">
<h5>$20,800</h5>
</td>
<td valign="top" nowrap width="208">
<h5>Total Expenses</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$6,306</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">Case study – mortgage rate 5.1%</strong></p>
<p>In the first case, the interest rate on the loan is the Reserve Bank of Australia’s indicator rate for a discount variable mortgage, current as of May 2014, of 5.1%.</p>
<p>At that rate, the investor pays $2,471 a month for the mortgage, or $29,651 over the year. This comprises of $21,147 in interest and $8,505 in principal repayments.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Mortgage Repayments (at 5.1%)</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Monthly Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$2,471</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Yearly Repayments*</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$29,651</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>*Comprised of :</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual interest repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$21,147</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual principal repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$8,505</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total cost of loan</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$741,286</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total interest paid</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$322,786</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">That means the property generates a taxable loss of $6,653 for the year. Taking into account the principal repayments, the property has generated an annual cash loss of $15,158.</span></p>
<p>The principal has reduced by $8,505 so there is $409,995 outstanding on the mortgage.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Taxable profit/loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">$20,800</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,306</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$21,147</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Taxable Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,653</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Principal Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$8,505</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Cash Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$15,158</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">Case study – mortgage rate 5.6%</strong></p>
<p>Say the interest rate was 0.5 percentage points higher at 5.6%, while rent and other expenses on the property remain the same.</p>
<p>Repayments on the loan are $2,595 a month, or $31,140 over the year. The amount of interest paid increases to $23,235 for the year. However, the amount that is repaid off the principal reduces to $7,905.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Mortgage Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Monthly Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$2,595</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Yearly Repayments*</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$31,140</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>*Comprised of :</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual interest repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$23,235</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual principal repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$7,905</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total cost of loan</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$778,503</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total interest paid</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$360,003</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">The annual taxable loss on the property increases to $8,742. The total cash loss is $16,647 and there is still $410,595 outstanding on the mortgage.</span></p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Taxable profit/loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">$20,800</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,306</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$23,235</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Taxable Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$8,742</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Principal Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$7,905</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Cash Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$16,647</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">Case study – mortgage rate 6.1%</strong></p>
<p>If the mortgage interest rate was higher again, at 6.1%, repayments on the loan would go up to $32,664 for the year.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Mortgage Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Monthly Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$2,722</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Yearly Repayments*</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$32,664</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>*Comprised of :</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual interest repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$25,326</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual principal repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$7,339</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total cost of loan</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$816,612</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total interest paid</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$398,112</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">The taxable loss for the year would be $10,832 and the cash loss, after principal repayments would be $18,171. Just $7,339 would have been paid off the principal, leaving a $411,161 outstanding on the mortgage.</span></p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Taxable profit/loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">$20,800</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,306</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$25,326</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Taxable Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$10,832</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Principal Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$7,339</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Cash Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$18,171</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">After tax comparison</strong></p>
<p>In the first example, the investor made a taxable loss of $6,653 and ended the year with $409,995 outstanding on the mortgage.</p>
<p>Let’s assume the investor’s annual taxable income (from employment and other sources) is $100,000. In the example where interest rates were 5.1%, the taxable loss on the property reduces the investor’s taxable income to $93,347 for the year, cutting the investor’s tax liability for the year by $2,462 and leaving them with an after-tax income of $70,862.</p>
<p>That means the after-tax cost of the investment (not including the principal repaid) is $4,191 and the total after-tax cash loss including the principal repaid is $12,696.</p>
<p>In the second example, the investment’s after-tax cost is $5,507 and the total after-tax cash loss is $13,412. The investor is $1,316 worse off at the end of the year in this case than if the interest rate was 0.5 percentage points lower.</p>
<p>In the third example, the after-tax cost is $6,824 and the cash loss after tax is $14,163. The investor is $2,633 worse off at the end of the year than when the interest rate was 5.1%.</p>
<p>Interest rate changes have a real impact on the returns from investment properties. To recoup higher interest charges, investors have a choice to increase rent, cut costs elsewhere (which might not be practical or possible), or cross their fingers for greater capital gains to compensate.</p>
</body></html>

zfielding-GvX3Uq9KTa

Negative gearing disguises short-term impact of rate changes on investors

<html><body>
<p><span style="line-height: 1.3em;">All experts surveyed by a rates comparison website have predicted that interest rates will stay on hold tomorrow.</span></p>
<p>In a survey conducted by <a href="https://www.finder.com.au/" target="_blank">Finder.com.au</a>, 18 expert respondents believed the Reserve Bank of Australia (RBA) will keep the overnight cash rate at its record low of 2.50 for July.</p>
<p>Of the respondents, 11 predicted that rates will rise in the next 12 months. Six experts – from Commonwealth Bank, Commsec, AMP, HSBC, St George Bank and Urbis – stated that interest rates could begin picking up before the end of the year.</p>
<p>The cash rate will stay on hold for this year, rising in the second half of next year, according to experts from Heritage Bank, RAMS, AAP and Westpac.</p>
<p>With almost all predicting an eventual rise, treasurer of ING Direct Michael Wills was the only respondent who argued that the cash rate could either increase or decrease at its next move, believing there were convincing cases for each scenario.</p>
<p class="Normal1">Analysis and research firm BIS Shrapnel, who did not participate in the survey, expect rates to stay on hold until an increase in 2015, anticipating a subsequent decrease in demand for off the plan properties.</p>
<p>“The expected tightening in interest rate policy is forecast to have an impact on off-the-plan purchasers,” wrote BIS Shrapnel in a statement last month.</p>
<p>“The first rises in interest rates are anticipated around the middle of 2015, with interest rates expected to reach their peak towards the end of 2016, thereby dampening demand over the subsequent years, and causing both new apartment approvals to decline and prices to weaken.”</p>
<p>According to Michelle Hutchison, Money Expert at Finder, borrowers must begin planning for a future rate rise.</p>
<p class="Normal1">“It looks like we have well and truly hit the bottom of the cash rate cycle and interest rates are set to climb within the next 12 months, with only one of the 18 experts in our survey (ING Direct) was unsure of which direction the next rate move will be,” said Hutchison.</p>
<p class="Normal1">“According to the Australian Bureau of Statistics, over 70% of households have some form of debt such as a home loan, credit card, personal or business loans or unpaid bills. So regardless of whether the next cash rate rise will be this year or next, it’s likely that most households across Australia will be hit hard and need to start planning ahead before it’s too late.”</p>
<p class="Normal1">Using ABS Housing Finance data, the comparison website has found Australians are increasing their debt levels in the housing market. The average home loan size has increased by 64% since 2004 to $314,000. The average size of fixed home loans has increased by 97% over the last decade, to $327,000.</p>
<p class="Normal1">For first home buyers, the average loan size has risen by 50% to $301,000.</p>
<p class="Normal1"><span>“With average home loan sizes among the highest we’ve ever seen, it’s a real concern that many borrowers will struggle with bigger interest rates," said Hutchison.</span></p>
<p class="Normal1"><span>“If the cash rate reaches average levels of the past decade of about 5 percent and home loan interest rates follow to an average of about 7 percent, that would cost the average home loan of $318,000 an extra $345 per month or over $4,000 in a year."</span></p>
<p class="Normal1"><span>“Everything you can do now to pay down your debts as much as possible will reduce the impact of rising interest rates in the near future,” she said.</span></p>
<p class="Normal1"><em>For the experts' predictions and commentary, go to the next page.</em></p>
<hr class="system-pagebreak">
<p>The experts surveyed by Finder made the following predictions:</p>
<p><strong style="line-height: 1.3em;"><strong style="line-height: 1.3em;">Garry Shilson-Josling, AAP<br><br></strong></strong><span style="line-height: 1.3em;">"...The recovery will be slow so there's no need to put the brakes on with a rate rise just yet. The outlook is highly uncertain, but in the absence of a major global shock the RBA should start lifting rates again after a fairly long wait as the economy slowly gathers pace..." <br><br></span><span style="line-height: 1.3em;">Predicts rates will change: Late 2015</span></p>
<p><strong>Shane Oliver, </strong><strong>AMP </strong><em style="line-height: 1.3em;">   <br><br></em>"...The Reserve Bank has cut interest rates to record lows...to boost the rest of the economy, and there's spectative evidence that it's working, but it's still tentative... The most recent budget has had a negative impact on confidence, and that's thrown a bit of a spanner in the works..."<br><br><span style="line-height: 1.3em;">Predicts rates will change:  Late this year or early next year</span></p>
<p style="line-height: 1.3em;"><strong>Warren Hogan, ANZ</strong><em style="line-height: 1.3em;"> <br></em><br>"The economy is playing out as expected ... essentially monetary policy is set to remain on hold for an extended period of time."</p>
<p style="line-height: 1.3em;">Predicts rates will change: Next year, possibly first half of 2015.</p>
<p style="line-height: 1.3em;"><strong>Steven Pambris, </strong><span style="line-height: 1.3em;"><strong>Bank of Sydney</strong> <br><br>"...The measures announced in the budget were as per our expectations with contractionary impact already reflected in the drop of consumer confidence in the latest surveys. We see that the current record low interest rates will have to continue for some time and in line with our previous position do not expect any movement in rates in 2014, if any more likely in March 2015" <br><br>Predicts rates will change: March 2015</span></p>
<p style="line-height: 1.3em;"><strong>Michael Blythe, </strong><span style="line-height: 1.3em;"><strong>CBA <br><br></strong>"The economy appears to be improving, but there's still a lot of uncertainty of course so it's the RBA's preference to wait and see what happens..." <br><br>Predicts rates will change: November 2014</span></p>
<p style="line-height: 1.3em;"><strong>Craig James, </strong><strong>Commsec<br><br></strong>"...At the end of the day, the Reserve Bank wants to keep inflation between 2.03%... As each month passes it does appear clear the Reserve Bank wants interest rates to remain where they are for a long period of time..." <br><br>Predicts rates will change: November/December 2014, maybe early 2015</p>
<p style="line-height: 1.3em;"><strong>Don Magin, </strong><span style="line-height: 1.3em;"><strong>Greater Building Society<br><br></strong>"...There is no sign of inflation. The RBA will be particularly concerned about pressure on capital expenditure. The good GDP growth we saw in 2012, based on investment by the mining sector, has subsided..." <br><br>Predicts rates will change: Mid-2015</span></p>
<p style="line-height: 1.3em;"><strong>Paul Williams, </strong><span style="line-height: 1.3em;"><strong>Heritage Bank<br><br></strong>"The RBA appears happy with current rate settings while the domestic economy tries to build some momentum. The RBA will be keeping an eye on the trends in unemployment, the strength of the Australian dollar, inflation levels, developments in key offshore economies, as well as rising tensions in the Middle East..."  <br><br>Predicts rates will change: Well into 2015</span></p>
<p style="line-height: 1.3em;"><strong>Paul Bloxham, </strong><span style="line-height: 1.3em;"><strong>HSBC</strong><br><br>"...Economic growth is still underway and interest rates will remain at record lows – which is where they are now."<br><br>Predicts rates will change: Around the end of the year, around Q4</span></p>
<p style="line-height: 1.3em;"><strong>Michael Wills, </strong><span style="line-height: 1.3em;"><strong>ING Direct<br><br></strong>"...It is difficult to see a scenario in which the RBA would change the cash rate... Equally compelling scenarios can be constructed to support both an increase and a decrease in the cash rate... Rates are on hold for an extended period that could extend into the first quarter of 2015."<br><br>Predicts rates will change: Could extend into the first quarter of 2015</span></p>
<p style="line-height: 1.3em;"><strong>John Caelli, ME Bank<br><br></strong>"...Growth remains moderate and consumer confidence has taken a hit following the Federal Budget. The uncertainty over the Budget process will cloud the outlook for a period of time. The next likely rate change will be in the first half of 2015 and is likely to be up." <br><br>Predicts rates will change: First half of 2015</p>
<p><strong style="line-height: 1.3em;">Glenn Levine, Moody’s Analytics</strong><br style="line-height: 1.3em;"><br style="line-height: 1.3em;"><span style="line-height: 1.3em;"> "...Inflation is within target and the economy is expanding slightly below potential... Tepid wage growth and a slightly looser labour market will help to keep inflation within target... The next move will likely be an interest rate increase around the middle of 2015 as we expect certain parts of the economy to be bumping up against capacity constraints by this time." </span><br style="line-height: 1.3em;"><br style="line-height: 1.3em;"><span style="line-height: 1.3em;">Predicts rates will change: Mid-2015</span></p>
<p style="line-height: 1.3em;"><strong>Jonathan Chancellor, </strong><span style="line-height: 1.3em;"><strong>Property Observer<br><br></strong>"...I still think the next rate change won't be until 2015, although the RBA historically likes to surprise. Let's see how the federal budget aftermath works it way through the economy after the new Senate in July takes effect. Consumer sentiment is still at its lowest level in almost three years..."</span></p>
<p style="line-height: 1.3em;">Predicts rates will change: 2015</p>
<p style="line-height: 1.3em;"><strong>Nathan McMullen, RAMS </strong><em style="line-height: 1.3em;"><strong>  </strong><br><br></em> "...Monetary policy settings remain mildly expansionary relative to long run averages and are appropriate given the current outlook for inflation... We continue to expect the RBA to keep interest rates on hold through the remainder of 2014 and much of 2015."<br><br>Predicts rates will change: Q4 2015</p>
<p style="line-height: 1.3em;"><strong>Janu Chan, </strong><span style="line-height: 1.3em;"><strong>St. George Bank<br><br></strong>"...On the one hand interest rates are quite low, and they are helping to support the economy, but at the same time there are some risks on the horizon... The strong growth that we saw in Q1... We'll not be sustaining that momentum in Q2..." <br><br>Predicts rates will change: November of this year, but this could be delayed until early 2015.</span></p>
<p style="line-height: 1.3em;"><strong>Scott Haslem, UBS<br><br></strong>"...We're seeing signs of improvement within the non-mining economy. The overall outlook for the economy is contained... The economy is not showing enough improvement for concerns of inflation..."<br><br>Predicts rates will change: Not until 2015</p>
<p style="line-height: 1.3em;"><strong>Nicki Hutley, Urbis</strong><br><br>"...A solid first quarter economic performance is likely to be followed by a bit of a stumble in the second quarter of 2014, on the back of weaker consumer confidence and demand following the Federal Budget... The RBA will want maintain its watch and wait stance for at least another quarter..." <br><br>Predicts rates will change: Q4 2014</p>
<p style="line-height: 1.3em;"><strong>Bill Evans, </strong><span style="line-height: 1.3em;"><strong>Westpac <br><br></strong>"...The terms of trade will have fallen in Q1 while the AUD has remained stubbornly high. We retain our forecast for an improvement in the condition of non mining equipment investment from a contraction of 11.5% in 2013 to a modest lift in 2014 of 3.4%..."     <br><br>Predicts rates will change: Third quarter of 2015, with a 25 basis point hike in both the September and December quarters</span></p>
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jrichardson-uRX5hFdKfN

Experts predict RBA will keep rates on hold for July: Finder

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<p>Rate predictions are starting to roll in, with less than week until the Reserve Bank meets again to assess he current cash rate.</p>
<p>General manager markets for ME Bank, John Caelli, has been clear that they do not expect the RBA to change the rates at their July meeting next week.</p>
<p>“Growth remains moderate and consumer confidence has taken a hit following the Federal Budget,” said Caelli.</p>
<p>“The uncertainty over the Budget process will cloud the outlook for a period of time,” he said.</p>
<p>How long will we see stable rates for?</p>
<p>“The next likely rate change will be in the first half of 2015 and is likely to be up,” he predicted.</p>
<p>This appears to be in line with other market predictions, with some debating the timing of the next movement, however the majority agreeing that the next change will be an increase.</p>
<p>Here are <a href="/expert-insights/finance/industry-perspectives-on-the-rba-s-interest-rate-hold">the industry perspectives on June’s interest rate hold</a>, for instance.</p>
<p><strong>YOU MAY ALSO WANT TO READ:</strong></p>
<p>Interest rates crash course: <a href="/expert-insights/finance/interest-rates-crash-course-whats-the-relationship-to-the-property-market">What's the relationship to the property market?</a></p>
<p><a href="/expert-insights/finance/16-experts-predict-no-change-from-rba-tomorrow">16 experts predict “no change” from RBA tomorrow</a> (June 2014 decision)</p>
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jduke-EHk3XBmHkn

No July rate increase - look to next year instead: ME Bank

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<p><span style="line-height: 1.3em;">Has the time come that the current methodology of real estate in Australia (which is seriously flawed) is ripe for demolition and an entirely different business model should be built to replace what we have today?</span></p>
<p>Let’s imagine a massive jigsaw puzzle scattered across the floor and we’re trying to make some semblance of this mess.</p>
<p>Let’s start on the basis that currently in Australia one third rent, the next third own with a mortgage and the final third own their home without a mortgage. Now, the Australian real estate market consists of thousands upon thousands of niche markets, yet for some strange reason under the Reserve Bank of Australia those with mortgages all share the same cash rate despite some of these markets booming and other markets posting negative capital growth.</p>
<p>Is it not time to be seriously looking at different cash rates based on the different niche market performances? For example, the Sydney residential market is overheated and should be paying a higher cash rate to slow the markets down; this would then avoid the inevitable crash in some of its niche markets. Why aren’t we looking at a model that would test some markets to see if such an example could work, after all we have a few thousand we could choose from?</p>
<p>Why does the rest of the world apply a tax on the profits, although Australia opts for a system where no tax is paid? Would it not make sense to see interest payments and improvements tax deductible if they looked at such a model? Why are home owners hit with stamp duty when this was supposed to be axed when GST was introduced in 2000 and why are there not concessions on stamp duty after a home owner pays their first stamp duty? Why do the state and territory governments offer first home buyer grants when it would make far better sense to offer a lower interest rate? When a home owner falls into financial difficulties, why don’t we have a distress rate until the owner (and the market) sees better times?</p>
<p>Back in the recession of the early 1990s we saw carnage with mortgagee-in-possessions only to see prices restored in just a few years. The losses incurred by home owners and the banks could have easily been avoided if it had been agreed to adopt a more patient approach where every party would have been much better off.</p>
<p>Given we now live in a society where thanks to the computer/technology age we have much simpler and clearer data we can have much more accurate positioning that enable us to see the bigger picture.</p>
<p>We are getting a clearer picture of overseas’ buyers using vast loopholes to purchase Australian property, yet the governments have done nothing about this for years. Every sale of real estate in Australia pays stamp duty so why are these details not being extrapolated to get a precise position on what is happening to Australian real estate? Why does this need to be handled (badly) by the federal government when it would make more sense that the state governments took this responsibility over?</p>
<p>Of course, such discussions are like opening Pandora’s Box however, we really need to start a conversation where hopefully rational ideas will evolve and grow.</p>
<p>We are witnessing massive infrastructure spends across Australia with the states and territories selling off assets simply because they are in a poor financial position, which brings us back to why this entire process is broken. These assets should be purchased by the Future Fund as a custodian until the relevant states and territories can buy them back.</p>
<p>The problem in Australia is that we have significantly broken systems that require a total overhaul although it’s becoming quite clear the preferred methodology is more like buying a home then selling when everyone says you must sell first – then buy.</p>
<p>I’m not sure about you, but I would love to see alternate real estate models for Australia and a test case of separate cash rates for different markets would be a fascinating experiment based solely on the performance of an individual niche market.</p>
<p>What remains to be seen is how many Australians believe the entire property system requires overhauling? When I see the NSW government announce a higher than expected $1 billion stamp duty windfall the pennies really do start to drop.</p>
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robertsimeon-hRNTwJyXkQ

We need to consider different interest rates for different sectors of the market

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<p><span>Given the outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the RBA board judged that the current accommodative stance of policy was likely to be appropriate for "some time yet</span><span style="line-height: 1.3em;">," the RBA June Board meeting minutes published today.</span></p>
<p><span style="line-height: 1.3em;"><span>At recent meetings, the board had judged that it was prudent to leave the cash rate unchanged. And it appears <span>for some time yet.</span></span></span></p>
<p><span style="line-height: 1.3em;"><span>"Low interest rates were working to support demand, although it was difficult to judge the extent to which this would offset the expected substantial decline in mining investment and the effect of planned fiscal consolidation. </span></span></p>
<p><span style="line-height: 1.3em;"><a href="https://www.propertyobserver.com.au/https://www.rba.gov.au/monetary-policy/rba-board-minutes/2014/03062014" target="_blank">"Those uncertainties were likely to take some time to resolve</a>," the minutes advise. </span></p>
<p><span style="line-height: 1.3em;"><span>"The earlier decline in the exchange rate was assisting in achieving balanced growth in the economy, but less so than previously as a result of its higher levels over the past few months."</span></span></p>
<p><span style="line-height: 1.3em;"><span>The board members noted that the exchange rate remained high by historical standards, particularly given the further decline in commodity prices over the past month.</span> </span></p>
<p><span>It noted a range of indicators of housing construction confirmed that a significant recovery was underway. </span></p>
<p><span>"Residential work done picked up strongly in the March quarter," the minutes noted.</span></p>
<p><span>"Forward-looking indicators of new dwelling investment were at high levels relative to recent years, although building approvals had declined in recent months.</span></p>
<p><span>"In the established housing market, dwelling price growth had eased from the rapid pace seen in 2013 and auction clearance rates in Sydney and Melbourne had declined from the high rates that prevailed during much of 2013."</span></p>
<p><span>The minutes noted m<span>easures of consumer sentiment had fallen sharply over the past month and were now below their long-run average levels. </span></span></p>
<p><span><span>However, it was noted that while low-frequency movements in confidence measures had been broadly associated with trends in consumption spending, there was little evidence from the historical record that high-frequency movements carried much predictive content.</span></span></p>
<p>In its post-meeting statement earlier this month, the RBA did not explicitly mention the deterioration in consumer confidence but comments around the improvement in business confidence and conditions compared with a year ago were removed.</p>
<p>ANZ believed there was a prospect the minutes could read a little more dovishly than the post-meeting statement.</p>
<p>ANZ concluded that the minutes <span style="line-height: 1.3em;">were "slightly more dovish" than previous rec</span>ent communications from the Bank.</p>
<p>ANZ suggested the key phrases included “Low interest rates were working to support demand, although it was difficult to judge the extent to which this would offset the expected substantial decline in mining investment and the effect of planned fiscal consolidation. Those uncertainties were likely to take some time to resolve.</p>
<p><span style="line-height: 1.3em;">ANZ advised this suggested that the Bank will err on the side of maintaining its very expansionary policy setting until it is clear that growth is above trend and spare capacity in the economy is reducing. </span></p>
<p><span style="line-height: 1.3em;">"Our base case is that the Bank starts to remove monetary policy support in Q1 2015 and increases the cash rate by 100bps over the year," ANZ economist Justin Fabo said.</span></p>
<p><span style="line-height: 1.3em;">"This would be relatively gradual initial policy tightening by historical standards. </span></p>
<p><span style="line-height: 1.3em;">"The risks, however, appear tilted towards a somewhat later start to policy tightening and/or more gradual cash rate hike increases if easy monetary policy is required for longer to support the transition in growth drivers in the economy."</span></p>
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jchancellor-FAypfDUnLy

Uncertainties likely to take some time to resolve: RBA

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<p>GUEST OBSERVATION</p>
<p>After much anticipation, the European Central Bank (ECB) finally announced some important policy changes that have seen the euro weaken by around one and a half cents against the Australian dollar. </p>
<p>The fall reduces the cost of imports from the eurozone by over A$3,000 for every €100,000 in a little over a week.</p>
<p>So why has the ECB caused the sharp move in the currency?</p>
<p>Most of the talk has been around the decision to reduce the deposit rate for bank deposits. Going forward, the ECB will charge commercial banks a fee in the form of a negative deposit rate for parking funds with them. This is a first for a developed nation and is aimed at forcing the banks to release capital, i.e. lend more so the real economy can get easier access to money. A real headline grabber!</p>
<p>The other less sexy measure was a new Targeted Long Term Refinancing Operation, with the acronym TLTRO, likely to replace the previous LTRO. The difference? This one is now targeted (just add T to the beginning). This policy is another injection of cash into the banking sector with some caveats attached which make it more targeted than the previous version. Commercial banks now have to use the money specifically to lend it out to the private sector.</p>
<p>In its accompanying statement, the ECB decided to “intensify the preparatory work related to outright purchases in the ABS market”. In other words, it's now committed to embarking on a European-style quantitative easing program which will serve to weaken the euro.</p>
<p><strong>But it’s not all about the euro</strong></p>
<p>Coinciding with a weaker euro, we have seen the Aussie strengthening on the back of some better than expected domestic economic data and a rosier outlook for China. In this context the local unit has pushed through 94 US cents and is seeing some calls for parity once again. The combination of these two forces sees the AUD/EUR cross-rate edging closer to 0.7, a level not seen since November last year.</p>
<p><img src="https://www.smartcompany.com.au/images/stories/vrondas%201606%20graph.jpg" alt=""></p>
<p>Whilst the trend is expected to continue, the <a href="https://www.ozforex.com.au/forex-tools/my-fx-dashboard?mode=advanced" target="_blank">chart above</a> highlights what could be a significant resistance point around 0.7116. For those businesses importing from Europe, a move above 0.7 to this level could represent a good opportunity to hedge some future exposures and lock in an exchange rate some 11% better than what it was in January of this year. Such significant cost savings should help deliver a better bottom line for businesses in the next financial year.</p>
<p><a href="https://www.linkedin.com/in/jimvrondas"><strong><em>Jim Vrondas</em></strong></a><em> is Chief Currency strategist, Asia-Pacific at </em><a href="https://www.ozforex.com.au/?cid=1300"><em>OzForex</em></a><em>, a global provider of online international payment services and a key provider of </em><a href="https://www.ozforex.com.au/news-commentary/daily"><em>Forex news</em></a><em>.</em></p>
<p><em><em>This article first appeared on <a href="https://www.smartcompany.com.au/" target="_blank">SmartCompany</a>.</em></em></p>
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Negative interest rates a boon for Aussie importers

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<p>Today is the fifth Reserve Bank meeting of 2014.</p>
<p>RBA Day, as it’s unofficially called here at the <em>Property Observer</em> office, has the whole industry pausing to check in at 2.30 – regardless of how sure they are that any change, or non-change as has most recently been experienced, is likely to be announced. Until 2.30, it's anyone's guess what could happen - and of course, "anyone" does indeed guess.</p>
<p>Forecasting, predicting or, indeed, downright guessing the RBA's next move, is now a favourite pass time of everyone from economists from the head of our big four banks, to the first home buyer tuning in to the news. We <a href="/expert-insights/finance/interest-rate-stays-on-hold-did-our-experts-get-it-right">regularly survey different experts and ask them to explain their reasoning</a>, which has provided some interesting insight into how the Reserve Bank may balance the different market forces in their own decisions.</p>
<p>However, just as it's not always clear when the RBA will make a change, and what that change might be, it’s also not always clear what the impact actually is.</p>
<p>Can extended periods of low interest rates really cause a property bust (as <a href="/expert-insights/investing/economists-warn-of-a-property-bust-if-interest-rates-stay-too-low">warned by some economists in this article here</a>)?</p>
<p>Do lower interest rates actually cause people to jump into the property market (as was <a href="/expert-insights/investing/effects-of-lower-interest-rates-clearly-evident-in-housing-market-christopher-kent">discussed at the Bloomberg Australia Economic Summit here</a>)?</p>
<p>The real impact of interest rates is heavily debated. Observer Catherine Cashmore, back in January 2013, argued that <a href="/expert-insights/investing/interest-rates-do-little-to-influence-australian-property-prices">interest rates actually have very little effect on property</a>. And then, last month, observer <a href="/expert-insights/finance/interest-rates-are-more-important-than-they-have-ever-been">Pete Wargent called interest rates more important now than ever before</a>.</p>
<p>"Pundits like to argue that in theory interest rates have little impact on housing markets, but due to the deregulation of the Aussie financial system and higher household debt today, this is incorrect, as partly evidenced by the impact of rate cuts since 2010," said Wargent.</p>
<p>"Shifts in interest rates were formerly somewhat limited in their ability to impact housing markets - since both lending and deposit rates were strictly controlled - yet today the availability and expectations around the cost of capital can be a key driver of market sentiment," he explained.</p>
<p>Regardless of who is right or wrong, it doesn’t stop the first Tuesday of the month being of fascination across the country and something that may have at least some impact on sentiment, if nothing more material.</p>
<p><strong>Quick terminology</strong></p>
<p>RBA: The Reserve Bank of Australia. Also, The Reserve Bank, Reserve Bank, The Reserve.</p>
<p>On hold: No change from the Reserve Bank</p>
<p>Basis points: One basis point equals one hundredth of a percent. So 100 basis points equals 1%. You’re most likely to hear this in terms of 25 basis points (0.25%) or 50 basis points (0.50%) as these are routinely the most used changes from the RBA.</p>
<p>The Official Cash Rate (or Cash Rate): The term describing the rate of interest on which the Reserve Bank charges on loans to banks. Some use this term interchangeably with interest rate.</p>
<p><strong>Quick answers to FAQs<br></strong></p>
<p><span style="text-decoration: underline;">When does the Reserve Bank meet?</span></p>
<p>The Reserve Bank meets on the first Tuesday of the month, excluding January. They announce their decision at 2.30pm.</p>
<p><span style="text-decoration: underline;">Why did they make a decision?</span></p>
<p>Currently, Governor Glenn Stevens publishes his meeting minutes at the same time. You can read these on <em>Property Observer</em>. They use a range of different data sets to make their choice, including looking at the housing industry.</p>
<p><span style="text-decoration: underline;">Does this mean my home loan rate will change?</span></p>
<p>While some years ago it was expected that the banks would change their interest rates in line with the Reserve Bank, in recent times this has changed. The banks and lending institutions now have their own meetings to decide on whether to pass on changes, or to cut or increase rates out of cycle. You can <a href="/expert-insights/finance/gap-between-official-cash-rate-and-home-loans-continuing-to-widen">see how far out of step they tend to be with the Reserve Bank in this article</a>.</p>
<p><strong>The latest movements</strong></p>
<p>The Reserve Bank has been on hold for an extended period of time. Having plotted the last 27 meetings (since February 2012, the first meeting for that year) including today’s, we’re in one of the lengthier periods of stability.</p>
<p>{plotalot id="16"}</p>
<p>The last interest rate increase was November 2010, when a 25 basis point change increased the cash rate to 4.75 from 4.50. 10 meetings of no change ensued until one year later, November 2011, the rate cutting cycle began, bringing the rates back to 4.50 and then to 4.25 after the December meeting.</p>
<p>The other decisions are visible in the graph above, bringing us to our record historic low interest rate of 2.50. In May, RBA governor Glenn Stevens said that it is <a href="/expert-insights/finance/strong-expansion-in-housing-construction-expected-rba-governor-glenn-stevens">likely the most prudent course of action to have a long period of interest rate stability</a>.</p>
<p>This low, and the general direction of the rates from the banks on offer being historically low as well, basically means that you can <a href="/expert-insights/finance/now-is-the-time-to-aggressively-make-mortgage-repayments-smartline">potentially aggressively pay down your principal</a> to give yourself some later breathing room and build some equity, with extra repayments or even by retaining your usual rate of repayment that you had prior to any decrease.</p>
<p><strong>How low can it go and where are we heading from here?</strong></p>
<p>As we're currently at lows that would have been seen as unprecedented, it's unsurprising that many do not believe it can fall much further, despite 1300HomeLoan managing director <a href="/expert-insights/finance/low-interest-rates-may-be-new-normal-john-kolenda">John Kolenda suggesting that this new low interest rate environment might just be the new normal</a>.<strong><br></strong></p>
<p>“Prior to the global financial crisis the norm for the RBA's official rate was around the 5% mark,” Kolenda said in April.</p>
<p>“The historical rates over the last 30 years have been much higher than for the previous few years. Consumer confidence is playing a bigger role in determining rate movements.”</p>
<p>However, if it isn't the new normal - and rates return to previously seen highs, such as those during 2008 where the rate hit 7.25, <a href="/news/act/interest-rate-increases-an-eventual-risk-for-borrowers-fitch-warning">home loan repayments could rise by up to 40%, according to Fitch Ratings</a>. Bad news for those stuck with the repayments, and bad news for those lending if they don't bear this in mind.</p>
<p>And, in fact, the next movement is actually likely to be up - although there have been no alarmists suggesting a return to GFC-style 2008 interest rates as of yet.</p>
<p>According to a recent survey of economists and property experts from Finder, which included our editor at large Jonathan Chancellor, <a href="/expert-insights/finance/16-experts-predict-no-change-from-rba-tomorrow">every single one of the 16 on the panel accurately believed there was to be no change this month</a>.</p>
<p class="Normal1">However, nine of those surveyed forecast an increase for next year (including AMP, ANZ, Bank of Sydney, ING Direct, RAMS, UBS, Heritage Bank, Moody’s Analystics and ME Bank).</p>
<p class="Normal1">A further five respondents said that cash rate would likely be increasing this year (Commonwealth Bank, Commsec, Urbis, HSBC and St George Bank).</p>
<p class="Normal1">And observer articles, such as from Robert Simeon, are tending to <a href="/expert-insights/investing/when-it-comes-to-interest-rates-investors-should-learn-a-bit-from-history">suggest that there could be significant interest rate increases</a> over the next year.</p>
<p>For borrowers, this prompts the consideration (particularly for those on variable rates) as to how to handle interest rate increases, particularly if you haven't really thought about it until now. If you're in this category, you can read our <a href="/expert-insights/finance/how-to-prepare-for-an-interest-rate-increase">"How To: Prepare for an interest rate rise" article</a>.</p>
<p><strong>CLICK HERE FOR MORE INFORMATION ABOUT INTEREST RATES</strong></p>
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Interest rates crash course: What's the relationship to the property market?

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<p>Mortgage rates below 5% are widely available given the cash rate has remained constant at a record low 2.5%.</p>
<p>Loans.com.au, for example, is offering a mortgage with a comparison rate of just 4.58%, according to RateCity.com.au. BankMecu is offering home loans at 4.7% and State Custodians has a mortgage with a comparison rate of 4.74%.</p>
<p>Such low interest rates, along with slowing property price appreciation, have made housing more affordable at a national level than it has been for more than a decade, according to the March 2014 quarter HIA-CBA Housing Affordability Index, released last week.</p>
<p>The index showed that across the country affordability was at its most favourable level since March 2002.</p>
<p>Affordability improved during the quarter in Sydney, Perth and the Australian Capital Territory, while it remained unchanged in Melbourne. Affordability also improved in regional markets in Western Australia, New South Wales and South Australia.</p>
<p>Properties in Adelaide, Hobart and Brisbane, as well as regional areas of Tasmania, Queensland and Victoria became less affordable, the index showed.</p>
<p>In its affordability calculations, the index uses the Reserve Bank of Australia’s indicator lending rate for the discounted variable rate of all bank loans available to homeowners.</p>
<p>The interest rate used in the March quarter was 5.1%. At that interest rate, monthly repayments on a $350,000 mortgage taken over 25 years are just $2,067, according to RateCity.com.au’s home loan calculator.</p>
<p>While most economists agree there’s little chance of an interest rate rise in the near term, many expect rates to be lifted at some point within the next 18 months.</p>
<p>Variable rate loans are still the most popular type, despite the increasing take up of fixed rate mortgages. This means most people who take out a home loan are fully exposed to fluctuations in lenders’ mortgage rates.</p>
<p>The probability that rates will rise means it is important for borrowers to consider higher interest rates in future when taking out a mortgage.</p>
<p>In the March quarter of 2013, the indicator lending rate was 5.67% and the year before that it was 6.67%.</p>
<p>The same $350,000 mortgage, over 25 years at a 5.67% interest rate would cost $2,185 a month – $118 more than the indicator rate in March 2014.</p>
<p>If rates go back up to 6.67%, as they were two years ago when the official cash rate was 4.25%, monthly repayments would rise to $2401 – $334 a month above current levels.</p>
<p>Over a 25 year period, interest rates will change dramatically. Between mid-1989 and early 1990, banks were charging an average of 17% on standard variable owner-occupied mortgages, according to the Australian Bureau of Statistics. Some commentators say there has been a structural shift in interest rate movements that would prevent rates from reaching those levels again, but higher rates than the existing levels are considered more normal.</p>
<p>As recently as mid-2008, the indicator lending rate for bank discounted variable rates was at 8.95%. Repayments on the $350,000 loan back then would have been $2,925 a month. That’s $858 a month more than the cost at current prevailing interest rates, which could cause significant affordability problems for borrowers who have not planned ahead.</p>
<p><strong>Housing affordability index</strong></p>
<p><strong><img src="/images/2014/06/02/zoe-june-2-one.jpg" alt=""></strong></p>
<p>* Annualised</p>
<p><em><span style="line-height: 1.3em;">Source: HIA-Commonwealth Bank Housing Affordability Index</span>* Annualised</em></p>
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Thanks to low interest rates, affordability at highest level for over a decade: HIA-CBA index

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<p>The Reserve Bank will meet again on Tuesday to decide the fate of the official cash rate, and the predictions are rolling in.</p>
<p><em>Property Observer</em> has compiled some of the predictions that are being shared by major institutions. Although it appears no one is expecting a change at the upcoming meeting, the point of contention remains the timing of when the next increase will occur.</p>
<p>While nearing the end of 2013, <a href="/expert-insights/buying/crystal-ball-gazing-property-market-predictions-for-2014">many were split over whether interest rates would fall further</a>, now it seems most are looking to rises.</p>
<p>In March, it was reported that some <a href="/expert-insights/finance/economists-predict-interest-rates-will-hit-4-25-by-end-of-2015-but-are-these-projections-likely">economists were expecting interest rates to hit 4.25% by the end of 2015, with some expecting a smaller increase to be more likely</a>.</p>
<p><strong>HSBC Global Research chief economist Australia and New Zealand - Paul Bloxham </strong></p>
<ul>
<li>NO CHANGE EXPECTED <br><br>
</li>
<li>NEXT UPWARDS MOVEMENT MAY BE BEFORE END OF 2014</li>
</ul>
<p>“We expect the RBA to remain on hold next week, at 2.50%. With momentum having slowed a bit, we expect the RBA to repeat that it sees rates as likely to be on hold for 'some time'.</p>
<p>"We still expect the next move to be up, although our view that this occurs before year-end 2014 relies on a further lift in local employment and a pick-up in China.”</p>
<p><strong>ANZ Research’s Morning Note</strong></p>
<ul>
<li>NO CHANGE EXPECTED</li>
</ul>
<p>"Yesterday in Australia, firms’ second estimate for 2014-15 capital expenditure intentions were stronger than market expectations, with non-mining investment expectations upgraded modestly.</p>
<p>"Nonetheless, these data continue to point to only a gradual upswing in non-mining business investment in 2014-15, which supports our view that the RBA is likely to remain on hold for an extended period of time.</p>
<p>"After adjusting for the typical bias in firms’ investment intentions, the survey suggests that total capital expenditure is likely to fall by 5.8% y/y in 2014-15 in year average terms. Actual capital expenditure in Q1 was weaker-than-expected at -4.2% q/q (mkt: -1.5% q/q; ANZ: -0.5% q/q)."</p>
<p><strong>ME Bank general manager markets John Caelli</strong></p>
<ul>
<li>NO CHANGE EXPECTED<br><br>
</li>
<li>NEXT UPWARDS MOVEMENT IN Q1 2015</li>
</ul>
<p>“We don’t expect the RBA to change rates in June. Inflation is within the target zone so the RBA can afford to wait and see the recovery unfold, noting economic growth continues to be below average, the transition to non-mining economic activity has further to go, and there will be some fiscal contraction from the budget.</p>
<p>"We don’t see rates increasing until at least the first quarter of 2015.”</p>
<p><strong>Commsec economist Savanth Sebastian</strong></p>
<ul>
<li>NO CHANGE EXPECTED</li>
</ul>
<p>"On Tuesday the Reserve Bank Board hands down its latest monetary policy decision. Since the last rate decision there is unlikely be any significant angst about how the economic recovery is panning out.</p>
<p>"Activity levels have been healthy and the Aussie dollar has barely budged, holding around US92-93c. It will be interestingly to see if there is any discussion by Board members on the ongoing negativity surrounding the Federal Budget and the resulting sharp pullback in consumer confidence.</p>
<p>:We expect the Reserve Bank to stay on the interest rate sidelines and attempt to gauge how the economy tracks over coming months."</p>
<p>In March, Smartline Personal Mortgage Advisors’ <a href="/expert-insights/finance/interest-rates-to-stay-low-for-12-months-smartline">Joe Sirianni said that they do not expect an increase until February 2015</a>.</p>
<p>“Even if rates do rise in early 2015, predictions are that this will be only a 0.25% increase, which will still mean rates will be at some of the lowest levels ever seen,” said Sirianni.</p>
<p>In February, the majority of those <a href="/expert-insights/finance/februarys-rba-rate-decision-the-experts-make-their-predictions">questioned by <em>Property Observer</em> in this exclusive about rates</a>, said that the next movement is likely to be the end of 2014. Whether it will be this year or next, time will tell.</p>
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