I would like to wish you a very Happy New Year and a prosperous 2017 ahead and let’s enjoy the festive season before we start afresh again.
I think we should all be grateful that we have come through a year that had some nasty surprise outcomes for investment markets which didn’t really have any major longer-term impacts.
Going into 2017 I think we can safely say that political turbulence means that there is more uncertainty over the global economic outlook than there has been for a decade. The interesting side to this is that we can now expect potential political disruptions in the elections to be held in Holland, France and Germany due to the ever-rising tide of populism which is currently gripping the globe. Even if the survival of the EU is not seriously threatened, it is becoming harder to implement reforms that would improve the stability of the region and the EU is not as well-positioned to withstand these shocks as the US was, in terms of where the economy sits in the current cycle. The reason I think this is interesting is that we can expect these outcomes to actually be a possibility, whereas, very few people expected both Brexit and the election of Donald Trump to occur in 2016, and so I think we have to stay vigilant for other “unexpected events” that could potentially drive investment market behaviour.
The other significant event was the eventual December increase by the Fed which raised the target federal funds rate 25 basis points to between 0.50 % and 0.75 %, which has seen a fairly substantial increase in bond yields across most markets and now the question seems to be the around the speed of future increases that the Fed will seek to implement in 2017. One of the outcomes of this has been the strength of the USD which looks set to continue over the course of the year, and can in turn, become an issue for US exports and perhaps further bolster the rhetoric around protectionism and trade sanctions to combat this. The Trump administration has signalled its intention to use fiscal policy, lower taxes and more public debt to fuel growth, rather than the central bank’s monetary policies of QE that we have seen over the last 8 years, and this in turn could also add upward pressure to the USD
I believe markets have reacted far too favourably to the US presidential election outcome and we don’t really know what the Trump administration will eventually implement from the electioneering promises that were made. With markets almost priced to perfection, the risk of a correction has significantly increased from where I saw things at this time last year.
To look at things from an Australian perspective further complicates the outlook as we may see a continuation of the of this year’s boom in commodity prices which could put upward pressure on the AUD, especially from current levels, and this along with the current weakness in the economy could force the RBA to cut the official cash rate again this year. Whilst this would be supportive of the property market, we have already seen the banks increase variable interest rates out of cycle and even more so with longer-term fixed rates.
Given this macro-environment, I see the east coast capitals having another good year with exception of inner-city apartment markets which have to deal with the increased supply of small investment-grade product completions as we move through this part of the cycle and new construction falls away sharply. The unwillingness of the banks to lend to developers of this type of product has had a major impact over the last year and I think this is very healthy for the market going forward.
I think Perth and Darwin will continue to see further declines during 2017 and Adelaide will probably go sideways as it contends with the nation’s highest unemployment rate and a weak immigration outlook.
Overall the investment outlook for Australian property seems quite constructive for 2017, especially when viewed from a risk/reward perspective as opposed to other asset classes that are at an investor’s disposal. Given the heightened risk of volatility and potential corrections that may occur in mark to market assets and the current ability to still lock in very favourable long term interest rates for property investment, this may prove to be a better outcome for those looking for a more steady ride.
Happy New Year!
I wish you all the very best with your investment outcomes, be they financial or holistic in their application.
Warm Regards,
Dr Andrew Unterweger
Chairman MB BS, CFP®, Dip FP,FPA, AFA, SMSF, Dip FNS, TPB
How Trump Could Accidentally Fuel a Global Trade Boom
by Sid Verma
December 22, 2016
What Trump’s Trade War with China Would Look Like
Are the stars aligning for an uptick in U.S. imports because of a strong dollar, a tight labor market, and expected fiscal stimulus?
Far from jolting the U.S. into a protectionist lurch, might President-elect Donald Trump unwittingly help buoy global trade next year?
Here’s one scenario to mull over: A strong dollar and a tight U.S. labor market, combined with Trump’s proposed fiscal plans, may fuel a rise in net U.S. imports in 2017, a boon for commodity exporters and goods manufacturers such as China—in defiance of the Republican’s protectionist vows on the campaign trail.
That’s the view advanced by Gabriel Stein, a developed-market analyst at Roubini Global Economics LLC. He reckons the stars are aligning for a broad-based pickup in investment activity that will see a rise in America’s current-account deficit next year, as all three domestic players—the public sector, households, corporations—draw down on their savings.
A $33 Billion Manager Who Bought at Market Low Returns to Cash
by Tom Redmond
December 23 2016
David Samra, the award-winning stock picker, is boosting cash holdings close to their limit in a market he sees as lacking buying opportunities.Samra, who oversees about $33 billion for Artisan Partners, says he increased cash to about 13 percent of his international fund, near the 15 percent maximum, as equities around the world extend rallies after Donald Trump’s election. While he’s been selling companies that he sees as reaching their true worth, he’s found it harder to find stocks to replace them.
David Samra. Source: Artisan Partners LP
The value investor makes no claim to being able to time the market, but his views on valuations can sometimes provide clues on its direction. In February, days before global equity markets ended a sharp downturn, Samra said he was buying again. These days, he’s spending more time seeking out ways to help improve the companies he already owns, such as Samsung Electronics Co. and UBS Group AG.
The big four bank has today announced that its variable mortgage rates for property investors will rise in response to changing market conditions.
ANZ today revealed that its variable Residential Investment Property Loan Index Rate would increase by 8 basis points to 5.60 per cent in response to “rising funding costs and changing market conditions”.
There is no change to ANZ’s standard variable rate for owner occupier home loans. Fixed rates remain unchanged for both investors and owner occupiers.
“Despite residential investor rates remaining at historic low levels, this was a difficult decision that took into account increases in our funding costs and our regulatory obligation to manage a balanced portfolio,” ANZ group executive Australia Fred Ohlsson said.
Major bank lifts rates, rolls out new interest-only products
by James Mitchell
December 13, 2016
Australia’s largest lender has lifted its variable rates for property investors and revealed it will introduce new interest-only products in March.
Commonwealth Bank today announced an increase in its standard variable investor home loan interest rates by 7 basis points, to 5.56 per cent per annum, and an increase in Viridian Line of Credit interest rates by 15 basis points, to 5.78 per cent per annum.
In addition, CBA said it is introducing “new interest-only products, for customers using this repayment option”. The bank said customers affected by the introduction of the new interest-only products will be notified with their regular statements. The product change will be effective in March 2017.
Richard Jerram
Chief Economist – Bank of Singapore
Member of OCBC Wealth Panel
Global growth has been remarkably stable over the past five years, once the rebound from 2008-09 recession had faded. Each year produced growth in the 3 to 3.5 per cent range compared to the cyclical swings of previous decades.
Our expectation was that the next couple of years would see a similar pace of growth. Certainly, deflationary risks were fading and were set to nudge higher, but none of this seemed particularly transformational.
We could characterise the past few years as being an “age of certainty”. It might not have felt like that at the time, given the stresses and concerns in the system, but we had the promise (and sometime reality) of policy support to guard against downside risks.
At the same time there was little prospect of resolving the structural problems that constrained growth, especially as in some cases (notably China) there was the prospect of stimulus being withdrawn whenever growth was comfortably buoyant. This “stop and go” world was stuck with an acceptable but unimpressive rate of growth.
Stable growth also created the environment for us to promote a broadly pro-risk asset allocation stance, although this has become more nuanced over the past couple of years as valuations became strained.
Strong hints by the US Federal Reserve that interest rates will rise at a faster pace in 2017 have sent the greenback flying against most major currencies but analysts doubt the Australian dollar will slide much further.
“Every analyst was picking that the Fed would hike, so that was absolutely no surprise, but what was a little bit more illuminating was the change in their forecast for the Fed funds rate in 2017,” said NAB senior economist David de Garis.
Price growth set to slow, but no-one’s tipping 2017 house price declines
by JONATHAN CHANCELLOR
DECEMBER 30 2016
Australia’s capital city housing markets generally continued to report robust selling conditions through spring with prices on the rise, especially in Sydney and Melbourne.
There was near double digit national price growth during 2016, which was well above forecast.
Low interest rates, increased investor activity, solid economic performances, high migration and heady confidence fuelled the Sydney and Melbourne markets, according to Dr Andrew Wilson, Domain’s senior economist.
“Although signs are increasing of subdued and weakening economic activity, the prospect for housing markets and prices growth – particularly in Sydney and Melbourne – remain positive for 2017,” Dr Wilson said.
The auction market ended 2016 on a high note, particularly for inner suburbs.
“This augurs well for 2017,” Richard Wakelin, director of buyers’ agent Wakelin Property Advisory told the Australian Financial Review.
by Annie Kane
December 14, 2016A leading Australian economist has predicted that the Reserve Bank of Australia will “reluctantly” cut interest rates next year, due to concern over house prices.There has been ongoing speculation that the cash rate could rise next year, following on from four months of record-low interest levels (of 1.50 per cent). However, Stephen Koukoulas, former chief economist of Citibank and senior economic adviser to the Australian Prime Minister, told Mortgage Business he believes that there will have to be another cut next year.Mr Koukoulas commented, “I think the RBA will cut again, reluctantly, because they’re worried about house prices, particularly in Sydney and Melbourne [where median house prices are at record highs of $1.06 million and $770,000 respectively].“I think, maybe early in the New Year (if we get another low inflation result at the end of January), if the labour market remains sluggish, the risk reward for the RBA is just to trim rates a little more, which might take a little bit of heat out of the Aussie dollar.”read more …
Major lifts rates for investors, will roll out new products in 2017
by James Mitchell
December 14, 2016
Australia’s largest lender has lifted its variable rates for property investors and revealed it will introduce new interest-only products in March.
Commonwealth Bank today announced an increase in its standard variable investor home loan interest rates by 7 basis points, to 5.56 per cent per annum, and an increase in Viridian Line of Credit interest rates by 15 basis points, to 5.78 per cent per annum.
In addition, CBA said it is introducing “new interest-only products, for customers using this repayment option”. The bank said customers affected by the introduction of the new interest-only products will be notified with their regular statements. The product change will be effective in March 2017.
No changes have been made to interest rates for owner-occupiers. CBA said its owner-occupier standard variable rate remains at 5.22 per cent per annum. Business rates also remain unchanged.
The bank’s group executive for retail banking services, Matt Comyn, said CBA has carefully considered the current environment when making this decision – in particular the higher costs associated with funding mortgages, the increased capital costs associated with providing home loans and the need to remain below the regulatory 10 per cent investor home loan growth cap.
With over 4% of housing stock in major cities like Sydney, Melbourne, and Brisbane listed on platforms like Airbnb, Australia ranks among the most heavily penetrated STR (Short-Term Rental) markets globally.
But while this fuels the tourism economy, the impact on housing availability and ...rent prices is sparking debate. Unlike other countries with tighter STR regulations, Australia has relatively light oversight.
🏗️ Exciting Construction Update on Dawn’s Progress!
🏡 Quality Craftsmanship:
Dawn’s fit-out showcases excellence in every detail. Our video highlights the remarkable progress of this apartment, emphasising the commitment to quality craftsmanship and thoughtful design. From ...foundation to finishing touches, no compromises have been made in creating a home that exceeds expectations.
🌴 Coastal Living at Its Finest:
Situated in idyllic Mermaid Beach, Dawn offers a lifestyle many dream of. Residents will have the privilege of enjoying the beach, golden sands, refreshing surf, and invigorating coastal walks right at their doorstep. Embrace the serenity and beauty of coastal living.
🛍️ Conveniently Located:
Mermaid Beach is a vibrant community with a wealth of amenities and attractions. Dawn is thoughtfully positioned near an array of dining, shopping, and entertainment options. From trendy cafes to world-class restaurants, Pacific Fair Shopping Centre to The Star Gold Coast, everything you need is within reach.
🪴 Thoughtful Design:
Dawn has been carefully designed to create a space that harmonizes luxury and comfort. The video showcases the sleek and modern kitchen, spacious living areas, and seamless indoor-outdoor flow. A testament to mosaics commitment in providing an elegant and inviting living experience.
🏊 Resort-Style Amenities:
Dawn will offer residents access to resort-style amenities, including a sparkling swimming pool, fully equipped fitness center, and beautifully landscaped gardens. These facilities enhance your lifestyle, offering relaxation, rejuvenation, and community connection.
🔨 Progressing Well:
Dawn is progressing beautifully, thanks to our dedicated team. Every aspect of this property meets the highest standards. In the video, witness the care and expertise that goes into bringing this exceptional home to life.
📞 Stay Updated:
To stay informed about the latest updates on Dawn, reach out to us. We will provide any information you need and keep you in the loop as this remarkable property nears completion.
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