Money Hasty interest rate hikes could trigger a property crash, UBS warns

06:21  11 november  2017
06:21  11 november  2017 Source:   Sydney Morning Herald

Home auctions rise, but well down on 2016

  Home auctions rise, but well down on 2016 Auction volumes increased across Australia's combined capital cities over the past week, as did resulting home sales, but at a much softer rate than last year.Property data group Corelogic's weekly property survey shows that the national auction clearance rate rose to 66.5 per cent, up from the adjusted 61.5 per cent in the prior week when the final figure was the lowest since early 2016, but well below the same time last year.

As property prices come off, but wages fail to grow, people are much more sensitive to interest rate hikes , says RBA. A recent correction in Australia's housing market could turn into a full-blown crash if the Reserve Bank hikes rates too soon or too fast, a global investment bank has warned .

As property prices come off, but wages fail to grow, people are much more sensitive to interest rate hikes , says UBS . Join today and you can easily save your favourite articles, join in the conversation and comment, plus select which news your want direct to your inbox.

With the housing boom over, the reliance on property as the bulk of people's household wealth looks to be under threat.© Supplied With the housing boom over, the reliance on property as the bulk of people's household wealth looks to be under threat.

A recent correction in Australia's housing market could turn into a full-blown crash if the Reserve Bank hikes rates too soon or too fast, a global investment bank has warned.

The end of the nation's world record housing boom and the drawing down of household savings has caught the RBA in an interest rate trap, says George Tharenou, chief economist at UBS.

Dubbing it the "household wealth effect", he has outlined a scenario where rising asset prices, falling savings and the fact that consumption has grown faster than wages leave Australians particularly vulnerable to interest rate hikes.

ANZ to pay $50 million to settle bill swap case

  ANZ to pay $50 million to settle bill swap case The Federal Court has approved an agreement under which ANZ will pay $50 million to settle its court action over bank bill swap rates.The Federal Court has approved a settlement under which ANZ will pay a $10 million penalty, $20 million to a financial consumer protection fund, and $20 million toward the Australian Securities and Investments Commission's costs.

blog 'michaeltle.blogdetik.com' is not exists. Well Logging for Physical Properties : A Handbook for Geophysicists

blog 'ashleyhenderson.blogdetik.com' is not exists. World Wide Rave: Creating Triggers that Get Millions of People to Spread

"People underestimate this sensitivity to interest rates," Mr Tharenou said at a market briefing in Sydney on Friday. "If the RBA hikes too much or too early, it runs the risk of turning a quarterly correction in the housing market into a crash."

"The run-up [in property prices] in recent times has people feeling better about their wealth, so they don't save."

The RBA on Friday signalled it will likely keep the current historically low official interest rate unchanged as it waits for a slow return to healthy levels of inflation, wages and economic growth.

Mr Tharenou sounded his warning after calling the end of Australia's 55-year long housing boom earlier this month, saying the golden years were "officially" over after home prices fell in Sydney for the second month in a row.

6 things Australian traders will be talking about this morning

  6 things Australian traders will be talking about this morning Good morning and happy Friday. To the scoreboard. Dow. 23,516.26 +81.25 (+0.35%) S&P 500. 2,579.85 +0.49 (+0.02%) AUD/USD. 0.7718 +0.0041 (+0.53%) ASX200 SPI futures (December contracts). 5,939 (+19)Good morning and happy Friday.

blog 'rachelcrawford.blogdetik.com' is not exists. Waterfalls of the White Mountains: 30 Hikes to 100 Waterfalls epub pdf txt.

blog 'kristinevans.blogdetik.com' is not exists. A Treatise On the American Law of Real Property , Volume 3 epub pdf txt.

A voracious construction cycle, urged on by record low interest rates and a flood of foreign investment into property, has left people complacent that their household wealth is sufficient - even if it may be tied up in their homes, leaving them potentially cash-poor.

Should property prices soften, as Mr Tharenou predicts, household consumption - the money people spend in the broader economy - could very quickly dry up as people focus again on saving, impacting the nation's economic growth.

"The RBA has acknowledged that risk, that there is uncertainty around the consumption outlook," said Mr Tharenou.

"They thought [consumption] would rise to above average but it hasn't done that so far and I think that it's unlikely to do so, there's just not enough income growth."

Meanwhile, the rate of household debt continues to grow faster than incomes.

"People are taking on debt to buy houses but without their wages growing," said Mr Tharenou. "I think low wages are a much more structural problem than people realise."

MotoGP driver in 'coccyx shock' crash

  MotoGP driver in 'coccyx shock' crash A MotoGP driver was sent somersaulting after an awful high-speed crash at the Valencia Grand Prix. Nakarin Atiratphuvapat high-sided at turn 14 during Moto3 practice at Circuit Ricardo Tormo and was violently thrown from his seat. The Thai Honda Team Asia rider flew over the handlebars and landed hard on the tarmac, rolling several times again before coming to a stop.The impact of the accident left the 21-year-old in obvious discomfort on the tarmac as he tried to get back to his feet.“Oh mate, that is coccyx shock," the commentator said of the crash."Straight on his back. That’s horrendous.

blog 'chrishunt.blogdetik.com' is not exists. The Best of the Appalachian Trail: Day Hikes epub pdf txt.

blog 'chadhelm.blogdetik.com' is not exists. Can my property flood? epub pdf txt.

"There is a lot more capacity in the labour market than many think, there's lots of underemployment and despite recent tightening, that hasn't resulted in wage growth."

And with the housing boom over, the reliance on property as the bulk of household wealth looks to be under threat.

UBS expects house price growth to moderate from double-digits to around 7 per cent in 2017, and not reach more than 3 per cent in 2018.

Recent data show evidence of a slowdown in house price is fast-emerging. House prices in Sydney fell 0.1 per cent over September, the first fall since late 2015, according to Corelogic figures.

And over the third quarter, Sydney's median house price fell 1.9 per cent to $1,167,516, according to Domain.

Traditionally, Australian monetary policy has followed that of the United States, which has begun its own rounds of interest rate rises.

But despite markets pricing in potential hikes in the near future, UBS doesn't see the RBA becoming swept up in the global tightening cycle.

"We won't see the RBA blindly follow the US, especially since people will really feel a hike in interest rates," said Mr Tharenou.

Sydneysiders have 'unrealistic expectations' amid a slowdown in the property market .
Sydney real estate agents say there's been a detectable shift in the local market Sellers are being forced to change their expectations Market is expected to continue cooling into the end of the yearAustralia's property market is cooling, and the slowdown is being led by the previously red-hot Sydney market.

Source: http://au.pressfrom.com/news/money/-46203-hasty-interest-rate-hikes-could-trigger-a-property-crash-ubs-warns/

—   Share news in the SOC. Networks
This is interesting!