The Reserve Bank of Australia (RBA) has cut the official cash rate in its May board meeting today, following weaker than expected inflation data.

The Board thought it was prudent to cut the official cash rate 50 basis points to 3.75 per cent, after headline inflation turned out to be significantly lower than the RBA’s target range of two to three per cent.

The rate cut failed to surprise industry pundits, with RP Data’s Cameron Kusher stating that the economy was in serious need of a "boost".

“We have seen a lot of softness in the economy of late. House prices are down on where they were, retail activity has slumped and headline inflation was just 1.6 per cent for the year,” he said.

“There is no doubt the economy is doing it tough at the moment and hopefully this rate cut will help ignite consumer spending once again.”

Managing Director of 1300HomeLoan John Kolenda said the 50 basis point cut was the minimum required to boost consumer and business confidence, especially as the banks were unlikely to pass on the whole cut.

“The RBA’s decision to swallow its pride today and cut the cash rate by 50 basis points will finally make people sit up and take notice that the central bank is serious about the non-mining sectors of the economy,” Mr Kolenda said.

“This is a good start but the RBA will likely need to cut rates again by 25 basis points over the coming months to really deliver the economic shock treatment the economy has been crying out for.”

Mr Kolenda said that the 50 basis point cut would deliver meaningful relief to borrowers even if banks only passed on part of the reduction due to increases in their cost of funds.

“When even former Reserve Bank governor Bernie Fraser was calling for a 50 basis point cut you know that some action was needed to get things moving again in the economy,” Mr Kolenda said.

“The retail sector is stagnant, the construction sector is stalled, and there is weaker than expected inflation so this cut was absolutely necessary but we mustn’t forget it is only the first step.”

With the RBA trimming rates, all eyes will now be on Australia’s lenders to see if they pass on the full rate cut to borrowers.

A real estate agency is under investigation by NSW Fair Trading for more than $1 million in missing funds, from two different parts of its business.

The agency, Dougmal Harcourts in Warilla - which comprised sales and strata management businesses - is being investigated for $200,000 in missing funds from the firm’s trust account, along with an additional $850,000 that's unaccounted for from its strata management sinking fund pool.

Fair Trading Commissioner Rod Stowe said Fair Trading had been notified of a significant deficiency in trust accounts by the licensee-in-charge on 24 January and launched an immediate investigation. The real estate agency side of the business is now closed.

Mr Stowe said approximately $200,000 is unaccounted for in the agency’s trust account, affecting seven groups of consumers in the process of buying a property.

“Fair Trading is contacting these consumers to advise them of the situation and how they may make a claim on the Property Services Compensation Fund,” he said.

Fair Trading said the agency also manages 236 strata schemes, involving approximately 1,800 clients.

“Approximately $850,000 out of a total sinking fund pool of $4.3 million administered by the agency is unaccounted for,” the commissioner said.

“There should be no immediate impact on the day to day operations of the 236 schemes, however the loss of nearly 20 per cent of the sinking fund pool will be addressed in the course of the investigation and by the manager.”

Harcourts NSW CEO Sadhana Smiles told Real Estate Business that the investigation solely related to the real estate sales and strata management components of the Warilla-based business. This franchise had been terminated, she confirmed.

She added that the property management company that is based in the same physical premises is run as an entirely separate business, and is not being investigated.

Mr Stowe said Fair Trading had responsibilities under the Property, Stock and Business Agents Act and associated legislation, such as the Residential Tenancies Act, to protect property buyers, sellers, tenants and landlords.

“Real estate agents are in a position of great responsibility and trust and are expected to act with honesty and propriety at all times,” he said.

“Agents are expected to take their professional oath seriously and comply with laws that govern the industry, including ensuring appropriate arrangements are in place to manage clients’ money.”

Mr Stowe said claims to the Property Services Compensation Fund must be made in writing to the Fair Trading Commissioner within 12 months of a person becoming aware of the failure to account, or within two years of the date the failure to account took place, whichever period ends first.

After a pessimistic year in most housing markets across the country, the outlook for 2012 is generally a return to growth, according to Australian Property Monitors' annual State of the Market Report.

Despite earlier signs of growth, a sustained spring revival in buyer activity failed to materialise.

In the quarter to October, national median house prices fell by 1.6 per cent and were down by 4.2 per cent over the year.

But, looking forward, the news isn't all bad.

Australian Property Monitors (APM) senior economist Andrew Wilson said 2012 will be a mixed bag when it comes to housing, with some capital cities set to revive strongly while others will remain flat.

Darwin, Perth and Brisbane have the best prospects for price growth, while Sydney and Canberra are also expected to achieve reasonable growth in the year.

Nationally speaking, Mr Wilson said property prices should grow somewhere between three and five per cent.

Meanwhile, Brisbane, Darwin and Perth are all expected to achieve growth between five and 10 per cent.

Melbourne and Adelaide on the other hand, are only expected to achieve growth of three per cent.

"Demand for housing will intensify in 2012, particularly in Sydney, Canberra and Perth, which will see housing markets reenergised albeit at different levels," Mr Wilson said.

"Australia's economic fundamentals are strong, and are well positioned to weather any downturn in international markets. This coupled with renewed buyer confidence, will be the key to driving prices growth in the New Year."

Jesmond is a suburb of the city of Newcastle. It is situated about 10 km west of the Newcastle Central Business District (CBD) in the Hunter Region of New South Wales, Australia. Its location being so close to the CBD is a major advantage towards the development and prosperity of this suburb. The area is both a commercial centre as well as a residential neighborhood. The profile of its residents is essentially multicultural, as the suburb caters to many international University students who attend University in the neighboring suburb of Callaghan. The suburb also offers good quality housing for the aged specifically with many such facilities located here.

Jesmond boasts of a number of good amenities that makes it very convenient for those residing here. According to the 2006 census, the population of Jesmond is 2,442 people.

History

Jesmond was originally known as Dark Creek. The area started seeing some development when workers moved in to work in the landowner’s steam saw mills. Some population also was employed as workers in the local orchards, mines and quarries. By the year 1883, the village had a population of 600. In the 1880s, John Campion opened a soap works in Jesmond, which caused a further influx of people into this region. By the early 20^th Century, his brand became extremely popular throughout the entire New South Wales region.

As far as the source of the name of Jesmond is concerned, there is some ambiguity about it. Some believe that it is named after a Tyneside town in North England and others believe it to be named after Jesmond Dene, a park in Jesmond.

Amenities

Jesmond Park, Heaton Park and Maclure Reserve have large open areas where a number of games can be played. These parks can be used for children’s activities, for bicycling, for walking and jogging, as picnic areas and also for skating. Jesmond has its own soccer team called Jesmond Football Club. They are known as “The Rams.” Their beginning dates back to 1928, and they have a proud history of many wins.

Jesmond has a number of schools including Heaton Primary and Jesmond Primary. It has good access to the University located in Callaghan.

The transport in this area is reasonably good. The bus services are regular and function well. There are a number of commercial establishments and shopping areas here. And, Blue Gum Road is a commercial hub for Jesmond.

Overall, Jesmond is a nice, comfortable suburb for residence. With its many amenities and a well-developed real estate, it offers a good investment in the form of purchase. Many properties are also available on rent.

For further information about real estate deals in this area, do contact No Bull Real Estate, your most reliable and friendly real estate agents in Newcastle.

 

The majors' decision to pass on the Reserve Bank's rate cut in full is likely to stimulate buyer activity, RP Data's Cameron Kusher has claimed, although it won't send property values soaring.

According to RP Data's research analyst, the rate cut will encourage an improvement in consumer confidence which in turn will create more retail sales transaction activity.

But while Mr Kusher expects sales activity to increase, he said it is unlikely the rate cuts will provide enough stimulus to result in any significant turnaround in property value growth.

"We suspect that consumers will remain cautious and continue to pay down their debt. Given this, the cut will likely provide welcome relief to home owners and may encourage some increase in sales activity next year, however, it is unlikely to provide a stimulant for property values to once again start increasing given the broader economic conditions," he said.

"Undoubtedly interest rate cuts improve housing affordability."

In stating this however, Mr Kusher said capital city property values have fallen by 4.0 per cent over the 12 months to October 2011 while rental rates have risen by 4.6 per cent which also improves affordability.

"Although history can be a guide to the future, we feel that conditions are somewhat different this time round - property values are higher than they have been before and although interest rate cuts and value falls help boost affordability, it remains much more affordable to rent than it is to purchase," Mr Kusher said.

A raft of economic indicators suggests market conditions may be somewhat different than those of the past.

Retail trade has grown by just 3.4 per cent over the 12 months to October 2011 which is well below the decade average growth of 5.4 per cent annually. GDP Data released for the September 2011 quarter this week shows that the Australian economy expanded by 2.5 per cent over the year compared to an average expansion of three per cent annually over the past decade.

The data also showed that households continue to save around 10 per cent of their income which is at levels not seen since the since the mid 1980's.

The total value of housing finance commitments have grown by just 4.1 per cent over the 12 months to September and have fallen by 1.3 per cent when refinances are removed. These figures are well below the respective decade averages of 9.4 per cent and 8.9 per cent.

Mr Kusher said that considering the European Governments are currently experiencing a debt crisis, not to mention the ongoing weakness of the US economy, these markets are certainly not looking as strong as they were over the past 10 years.

"Given the overall cautious nature of Australian consumers and the weak economic conditions in a number of other advanced economies , it would seem unlikely that even if the Australian economy continues to perform comparatively well, credit for housing will be as freely available as it has been in the past over the next 12 months."

rebonline.com.au

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.25 per cent, effective 7 December 2011.

Growth in the global economy has moderated this year after a strong performance in 2010. Some of the slowing reflected temporary factors, and as these passed, the pace of expansion in the United States and much of Asia began to pick up around mid year. China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.

The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead. Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe. This, together with precautionary behaviour by firms and households, means that the likelihood of a further material slowing in global growth has increased. Commodity prices have reflected this, declining further over recent months and taking pressure off CPI inflation rates. This has increased the scope for some easing in monetary policy in a number of countries.

Information about the Australian economy suggests output growth has been close to trend, with demand growth stronger than that. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, changed behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little since mid year, though it remains close to 5 per cent.

CPI inflation on a year-ended basis remained above the target at the latest reading, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.

The reduction in the cash rate as a result of the Board's previous decision flowed through to lending rates, which are now around their average level of the past 15 years. Short-term market interest rates have tended to decline a little further in recent weeks, though term funding conditions for financial institutions have become more difficult. Credit growth remains subdued and asset prices have declined further over recent months. The exchange rate has been quite variable over the past few months, but remains at an historically high level.

Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.

Property commentators are “quietly confident” that property prices have bottomed out and will steadily increase from here on in.

Speaking to Real Estate Business, RP Data’s chief executive officer Graham Mirabito said all the data suggested the property market has hit rock bottom.

“We are starting to see house prices track sideways, which is really good news for the property market. It suggests we have hit the bottom and will now see things improve,” he said.

Earlier this week, RP Data’s Home Value Index recorded the lowest drop in capital city home values in seven months.

The Index, which captured nearly 251,000 sales in the first nine months of 2011 alone, showed the September monthly decline was actually the smallest decline since February 2011 and was crucial in reversing a trend of accelerating capital losses since end March 2011.

Capital city home values fell just 0.2 per cent, while regional house values actually managed to increase, growing 0.1 per cent.

“We are quietly confident this is the bottom, but there are still a few things in the mix to know for sure. We will definitely know whether or not this is the case by February, March,” Mr Mirabito said.

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.5 per cent, effective 2 November 2011.

Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity. China's growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding. Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue. Commodity prices, while still at high levels, have generally declined over recent months.

Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the United States and by signs that European governments are making progress in their efforts to deal with the sovereign debt and banking problems. Equity markets have gained ground and the Australian dollar has risen significantly as risk aversion has lessened. But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households.

Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5 per cent.

After underlying inflation started to pick up in the first half of the year, recent information suggests the subdued demand conditions and the high exchange rate have contained inflation more recently, notwithstanding continuing sizeable increases in utilities charges. CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.

Financial conditions have been easing somewhat recently, with market interest rates declining a little and competition to lend increasing.  But overall conditions have remained tighter than normal, with borrowing rates still a little higher than average, credit growth subdued and asset prices lower than earlier in the year. The exchange rate has been very variable over the past few months, but on the whole has remained at historically high levels.

Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2–3 per cent inflation over time.

Claims that Australia is in the midst of a property price bubble have been dismissed by RP Data.

Controversial pundit Professor Steve Keen has for years been forecasting an Australian property bubble, warning that values will fall by 40 per cent over the next decade, however few share Mr Kean's radical views.

Speaking to Real Estate Business, RP Data’s chief executive Graham Mirabito said what Australia was currently experiencing was a property price correction rather than a “collapse”.

According to Mr Mirabito, a housing bubble suggests housing values increased too rapidly and are set to experience a rapid decline, a fate not likely to come to fruition in Australia.

“Investors often ask us whether or not we are in a property price bubble. Given that 60 per cent of the balance sheets of the major banks are residential mortgages, investors obviously want to know whether or not Australian banks are a sound investment,” Mr Mirabito said.

“Our response is that we are not in a bubble, but a housing correction.

“While Australians definitely like debt, more than 40 per cent of mortgage holders are more than three payments in front, so we are very good payers. In addition to this, we are currently in the middle of a population boom, so there will always be demand for property.”

Mr Mirabito said Australian property prices grew 12 per cent after the GFC, now prices have fallen by approximately 3 per cent.

“This isn’t a bubble, it is a soft landing – much softer than we have seen in other countries. Over the longer term, demand will continue to be there, which means property prices will eventually rise again.”

4 October 2011

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.

Conditions in global financial markets have continued to be very unsettled, with uncertainty increasing about both the prospects for resolution of the sovereign debt and banking problems in Europe, and the outlook for global economic growth. While temporary impediments that had contributed to a slowing in growth in some countries over recent months are lessening, recent data suggest a continuing period of soft economic conditions in both Europe and the United States. Moreover, the uncertainty and financial volatility have reduced confidence, which could result in more cautious behaviour by firms and households in major countries.

It will take more time for evidence of any effects of the recent European and US financial turbulence on economic activity in other regions to emerge. Thus far, indications are that economic activity is continuing to expand in China and most of Asia. Nonetheless, recent events have led forecasters to reduce their estimates for global GDP growth, which is now expected to be about average this year and next. Prices for commodities have declined over recent weeks, though in general they remain high.

Australia's terms of trade are very high, which has increased national income considerably. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. In other sectors, cautious behaviour by households and the earlier rise in the exchange rate have had a noticeable dampening effect. The impetus from earlier Australian Government spending programs is now also abating, as had been intended. While there remain good reasons to expect solid growth over the medium term, the indications are that the pace of near-term growth is unlikely to be as strong as earlier expected, due both to local and global factors, including the financial turmoil and related effects on business confidence.

Underlying inflation stopped falling and began to increase earlier this year. The Board has been concerned about the prospect of a further pick-up over the period ahead, but over recent months has been weighing the question of whether a period of weaker than expected conditions would contain that pick-up in inflation. Recently revised data show a pick-up to date in the underlying pace of price rises that was less sharp than initially indicated. Moreover, with labour market conditions now a little softer and households more concerned about the possibility of unemployment rising, the likelihood of a significant acceleration in labour costs outside the resources and related sectors is lessening.

Taking into account all the recent information, the path for inflation may now be more consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme. This assessment will be reviewed on receipt of further data on prices ahead of the Board's next meeting. An improved inflation outlook would increase the scope for monetary policy to provide some support to demand, should that prove necessary.

The Board noted that financial conditions have been easing somewhat, with interest rates for some housing and business loans declining slightly due to increased competition and the fall in some funding costs in financial markets. The exchange rate has also declined from the very high levels of a few months ago. Credit growth remains low, however, and asset prices have declined.

At today's meeting the Board judged the current cash rate remained appropriate. As always, the Board will continue to assess carefully the evolving outlook for growth and inflation.