NEWSLETTER – SEPTEMBER 2016
BUSINESSES AT THE COLD FACE
The Australian stock exchange continue to ride on hopes and fears of the American interest rate announcements (which appears to be holding firm). In the last quarter, we have seen the index remain steady which is in slight contrast to the challenges it faced in the previous 12 months. We expect some moderately positive movement in the coming quarter, again on the back of new that the U.S. economy is in slow recovery. Economists are also projecting that Japan’s latest economic reforms will have a positive effect on our exchange.
The settlement industry is definitely still at the bottom of the property cycle. Landgate has given a number of statistics which indicate that property settlements for the past financial year 2015/16 were 22% down on two years ago 2013/14.
Lodgements of all documents showed a 12% decrease for the same periods which means a 12% decline in general property activity.
The total number of new lots created for the last three years has not changed much namely 32,261 for 2013/14, 33,988 for 2014/15 and 30,250 for 2015/16.
THANE FINANCIAL PLANNING
The month of June saw mild gains in the AUD with the US’ forecast to lower interest rates in addition to a sharp gain in commodity prices, with gold increasing 8% and iron ore 11%.
July saw the AUD rise due to strong commodity prices, the delay of US interest rate rises in addition to talk of further economic stimulus policies in the EU.
This compared to August’s performance which pushed the AUD back down due to a combination of the drop in iron ore and gold prices, the RBA rate cut and predicted US interest rate rises.
After the previous 3 months’ fluctuations, this has resulted in the Australian dollar currently sitting at 0.76 US dollar, a price that RBA Chief Glenn Stevens has commented to be ‘close to fair value’.
Tenants certainly have the rental market in their favour and moving forward given the historical data we don’t see much changing in the not too distant future.
According to the REIWA Market Update ending August 2016, the overall rental prices dropped a further $5.00 with the current medium rental price now sitting at $375.00 per week.
In addition to the rent drop, the vacancy rate has jumped once again, at the end of August the vacancy rate was sitting at 6.7% a considerable increase from the July 2016 figure of 6% vacancy rate.
However, with the last two statements in mind, REIWA noted that there are signs that investors have had an increase in leasing activity.
In the last 3 months leading up to August, WA has seen a 1.6% drop in the medium house price with the median property price according to REIWA’s market report for June 2016 sitting at $530,000 this has been combined with a slow in sales activity by 2%
THE ECONOMY AT A GLANCE
Source: Reserve Bank of Australia. Released on 8 September 2016 (Data updated to 7 September 2016).
A NOTE FROM THE PRINCIPAL
The overall shape of the Australian economy still remains challenging with significant downward pressure on interest rates. Particular areas of concern are housing market activity, retail sales and unemployment (WA being the hardest hit). The last quarter’s economic activity has given clear indication for the next quarter’s trend (another challenging quarter).
Interest rates are the best option for stimulus at this point, however this is providing that the banks pass on the rate cuts in the manner that they are intended to.
There are some global (long term) positive indicators with some (albeit slow) signs of recovery and results of economic reform in countries that have struggled for the best part of a decade.
However, in the near future, we see more of the same for Australia.
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