Looming recession

Sydney more likely will have higher rental returns, considering there is a short fall of investors…

-Thomas

“More Time To Snowboard”

Interest rates go down in a recession not up. Normally central banks put interest rates up to dampen growth. Rates are lowered during a recession to try and stimulate investment.

hi matthewsteger
couple of things to understand.
1. extremely high interest rates, low rental returns, and higher tax? can’t happen

why because when you get high interest rates
the rents have to increase to cover the returns and by doing that you can’t increase tax as well because people slow down working to meet the loss of wages.
the idea is simple get the worker to work
to gain a wage that will then flow thru to the avenues that you want that money to go to.
and to do this if you spend to much on new cars and houses
the goverment say put up interest rates to slow you buying those items.
if you stop buying new cars the goverment says lower interest rate so you have cash to buy new cars.( there is a little bit more to it then that but you get the drift)
as the rents move up to release that rental pressure you need people to buy new units but you also don’t want to reduce rates so thats whats called balancing.
we have one of the highest interest rates in the world and by the reserve banks balancing and not allowing asian banks in here to drive down our rate it is keeping us above water.
I don’t see our rate increasing above 2% within the next 3 years as long as china keeps meteor flight in growth
as there banks lend at 1.5% and they don’t look at us as they are growing to a rate that they don’t need to.
and the reserve nows it.
push up rate over 7% and the asia banks will say oh lets start lending here.
higher taxes
they are on the cards but I think for self managed superfunds and retirees(I’m in that group but will off shore mine)
our market is small and will always be seen as such
you will have the 1% movements but the big question is will asia keep going like it is and pulling our commodities along with it or will it stop.
and that I am sorry to tell you is better guess at the moment then winning lotto
oh and lotto this week was 5 million some of the chinese projects are worth 2 billion and still we can’t guess this question.
crystal balling is good but mine is a little clowdy and I can’t buy a new one.
you need to adjust to your market and for me I will be very suprised if rate move over 1% by jan 2007 and another 1% by next jan 2008
but if asia crashes then all bets are off.
one thing that I do see is that your will have a cronic lack of rentals in sydney first and melbourne next and this will be this year.
so if you have tennants moving out have a chat with your agents with regards to enquiry levels and its a time to be moving the rates up. they are move relatively quickly up in sydney.
a 2 br inner suburbs in sept 2005 was 350 per week 2005 same unit is running at 400 and has 13 people wanting to rent it and will be a dutch auction soon.
not sure about the 2009 time frame as I haven’t seen the data and what its worked on.
hope its not on bob and pauls the recession we need to had.

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