2008 is set to be an interesting year in so many ways. We are looking at further interest rate rises as inflationary pressures force the Reserve Bank to tighten monetary policy. Further increases in the cost of oil and grocery's are likely to put pressure on prices for consumers and low unemployment will continue to fuel spending.
The big questions are how high will interest rates go and who can we blame for the increase? There is no simple answer to the question, however I believe interest rates will increase to 9-9.5% and it would be unlikely to reach double digits. The Reserve Bank’s independence means that increases in rates will be made without political bias and will be in the best interests of the country as a whole.
The Australian economy has enjoyed 16 years of consecutive growth which means the first 5 of those were under a Labor Government, followed by 11 under the Coalition. Regardless of which party is in power after Saturday interest rates will increase in 2008 and Australians should be tightening their belts and avoiding excess.
The top end of the market is booming and will continue to boom in 2008. The top end of the market has come through 2007 unaffected, with units and low-end property prices steadying, although many buyers are carefully considering their decisions and taking their time to make offers.
This leads us to yet another question – Will 2008 be a good time to sell? In 2007 most vendors have made the decision to move based on lifestyle factors and financial pressures rather than the realization of capital gain. 2008 looks like continuing that trend.
There are buyers at every level of the market, however, prices are steady and should continue to be the same over the next 12 months. Top end property and those in the Sydney’s West will be the exception in 2008. We will continue to see records set in Sydney’s beachside and harbourside suburbs and suburbs in Sydney’s “mortgage belt” like Glenmore Park, Blacktown and Liverpool will struggle under the weight of further interest rate increases. This should provide some excellent buying opportunities for those with the capacity to purchase with foreclosures likely to reach levels not seen since the early 1990’s. Rental prices will continue to increase in 2008. Increased yields will please investors who have struggled for so long and chosen shares over property. This could mean further movement into bricks and mortar which is a positive thing for those selling in 2008.
All in all the year looks like being a tough one for those already feeling the pinch and the rich will continue to get richer. The need for an immediate solution to housing affordability will become even more apparent and investment in infrastructure to connect the regional cities to our capitals will require a solution that involves full co-operation between the State and Federal Governments. Maybe a Labor Federal Government will be able to better co-operate with the State Labor Governments? Michael Marquette