Jump in jobless rate changes interest rate assumptions
Australia's jobless rate climbed to 6.4% last month, a 12-year high that fundamentally alters assumptions about what the Reserve Bank of Australia might do to interest rates in coming months. A consensus of analysts believed that rates would begin to rise by the middle of 2015 while staying put through the end of the year … before the Australian Bureau of Statistics report released Thursday. The unemployment figure might be a statistical fluke, a sampling error or a result of a change in methodology. Nonetheless, currency traders shaved a cent off the Australian dollar on the news, while options traders gave a 32% chance of an interest rate reduction by Christmas. Bets were even before the release. Read the full story here.
QBE tells regulators a four-to-one loan to value ratio isn't needed in Australia
QBE Lenders Mortgage Insurance hopes to encourage the Australian Prudential Regulation Authority not to tighten lending standards. Analysts widely predict that the Reserve Bank of Australia will maintain low interest rates through the end of the year, but as housing prices continue to rise – and the amount of speculation in the market rises with it – lenders fear the APRA may take action on its own. New Zealand imposed higher standards for lenders, limiting loans of more than 80% debt-to-equity to no more than 10% of new volumes. QBE and Genworth dominate the mortgage insurance market in Australia, which covers loans at less than 20% equity. Read the full story here.
Foreign investors discover the rest of Australia, beyond Sydney and Melbourne
Warehouses in Perth. Malls in Brisbane. Office parks in Adelaide. The global investment community has been branching out from the traditional targets in Sydney and Melbourne, looking for more attractive valuations and more diversified risks. Some of this comes with an increasing level of comfort with the Australian market, said Ian Schilling, head of Australian real estate at Invesco. The commercial property market has been expanding to record levels this year, leaving fewer choice pickings in the lot. But the return on equity in Australia remains appealing, given falling yield in other markets. Read the full story here.
In a hot market, some experts suggest buying a new home before unloading the old one
The northern beaches of Perth have been a super-hot property market. Auction clearance rates reach 90% some weeks. Houses stay on the market for days, perhaps weeks. Demand remains very high for family dwellings. That makes older homeowners looking to move a bit nervous, because finding a suitable new place to live may actually be harder than selling one's current home. It turns conventional wisdom on its head, of course; a sudden problem with a sale might leave a seller with two mortgages to cover and less leverage to hold out for a great bid. But for homes valued above $1.5 million – and homeowners who may not have entered the property market in years – the result of downsizing may be a long stay in temporary quarters, some agents say. Read the full story here.
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