The Australian dollar has dropped to a four-and-a-half year low after a report from the National Australia Bank revised its forecast for interest rates and is now predicting two rate cuts in 2015; it had been expecting increases.
Prices expected to grow in 2015, but slower than this year
End of year predictions for the coming 12 months suggest more of the same for the housing market…although at a lower level. Although prices and sales are moderating to some extent towards the end of year, there is likely to be a continued growth in both sales volume and value in 2015. Analysts believe that there will be better choice for buyers in the next year with extra supply helping to moderate prices, which will see a steadier rise than this year. Investors will continue to be active in the property market although with rents not delivering quite what they had in mind many will look at other countries. Overall there appears to be a more optimistic outlook for owner-occupiers although first home buyers may still find many markets a little out of reach.
Banking regulator acts to cut risky lending
The financial regulator will be visiting banks and lenders early in the New Year in search of risky practices. If the Australian Prudential Regulation Authority is not satisfied with its findings then lenders will face additional measures which could include a requirement for larger financial buffers to bolster protection from an economic crisis. APRA Chairman Wayne Byres says that the regulator will be increasing its hold on the sector in line with the current level of risk. With low interest rates, high household debt and lenders keen to be competitive with their mortgage products the APRA is concerned that some lenders may be making poor decisions especially with regards to high-risk home loans. There is also likely to be a focus on ensuring that borrowers are well placed to cope with interest rate rises of up to 2 per cent if that was to be necessary.
Younger Aussies may not see the boom times of their parents
A new report suggests that younger Australians may have a lower living standard than their parents due to greater government spending on older Australians and the high prices of property making it harder for first home buyers. The Grattan Institute’s Wealth of Generations report says that government deficits that will ultimately need to be balanced by younger Australians mean they may miss out on some of the benefits that their parents have enjoyed.
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