Rate cuts, election promises and the economy - May 2019
In today's update, we look at rate cuts, election promises, and the economy through the lens of a property and finance perspective and of course, in Black & White.
Rates going low
Economists including those from Westpac, HSBC, NAB and AMP, believe the Reserve Bank will reduce rates not just once, but twice by the end of the year. These experts believe the cash rate will drop from 1.5%, to 1% by December 2019. NAB has even said the cash rate could drop to .75% in 2020. All bank variable home loan rates should then be dropping soon too accordingly - well so we hope that the banks pass these reductions on.
Most banks have already dropped their fixed rates though, to incredibly low levels which is great news. It’s probably a good idea to talk to us about securing something super competitive if you want that certainty around your future repayments and like the idea of locking something in.
In any case, watch this space...
Election campaign promises
Here’s a quick summary for you with the housing related promises from each political party, for those that haven’t had the time to pay attention.
Labor
Negative gearing, to be abolished, except if purchasing new property. Meaning, the losses (when the expenses exceed the rental income during the financial year) made on your investment property, will not be able to offset your total income that you pay tax on at the end of the year.
As well as, halving the capital gains tax discount of 50%, to 25%, which we currently receive if we hold an investment property for more than 12 months, then sell it. Meaning, Australian’s will be paying back more tax for selling an established investment property.
Liberal
Pledged no changes to negative gearing or capital gains tax.
Promised to help 10,000 first homeowners get a loan with just a 5% deposit by going guarantor and saving them the typical lenders mortgage insurance fee. Only available to those first homeowners with an income of up to $125,000, or couples with a joint income of up to $200,000.
Labor said, they would match this initiative and also implement it.
If you want to know more about the policies of each political party, click on the party heading name and it will take you to their relevant sites.
Our Economy
The fall in prices is slowing:
We’ve all heard that house and unit prices have fallen but the good news is that ANZ economists believe the rate of falling is easing in Sydney and Melbourne, and expected to level out even more in the next 12 months. This slow down in the rate of falling has been spurred mostly by improvements in affordability and First Home Buyers in the market, the Australian Bureau of Statistics data suggests.
The bigger picture:
In NSW and Sydney in particular, experts believe that the broader economy here will be sustained by investment projects in infrastructure and continued population growth, even though construction has slowed. So, while wages or the jobs data isn’t as good as hoped, things are moderately stable. It’s the way the entire country’s economy is tracking as a whole, with below trend growth and below target inflation which is potentially a concern and is why the Reserve Bank is likely to drop rates relatively soon.
In Summary
So while real estate sentiment is low but improving, prices a tad lower, with these lower interest rates, you don't need to be an economist to work out it's a good buying time if we're willing to hold for the long term. Regardless of which political party gets in today, we know that long term, house prices do go up.
In the community
We thoroughly enjoyed reconnecting with the Prince of Wales Hospital last week, in support of their Medical Grand Rounds day. It was encouraging to hear from and speak to some of the same faces again. We very much appreciate these opportunities to support local communities and develop these deep relationships.
We're keen to hear what you think about our content. We're keen also to receive your questions and if you want to know of some other great terms or rates on offer at the moment, and would rather email, please send a note to peter@blackandwhitefinance.com.au
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