Property Price Rises in Sydney’s West?

By Louis Christopher on 1 May 2014
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Property Price Rises in Sydney’s West

How will the new Sydney Airport impact property in the west?
Photo: Simon_sees

Property Price Rises in Sydney’s West?

Of course we welcome the second Sydney airport and believe it is going to be a great job booster.

We have no doubt that additional premiums will be paid for real estate in certain western localities over the long-term.

However, as I stated to Tim McIntyre, investors really need to get more information about what is being put in.

“I suspect there will be at least one cyclical downturn before the completion of the airport.”

We need to understand the exact infrastructure. We need to know the flight path. If you buy under the flight path, I can tell you right now that those properties will be selling at a discount to the rest of the region. We need to know which land is going to be opened up for residential development and how quickly it will be released to the market.

Let us also remember that Sydney’s west and south west have recently experienced rather rapid rises of 20 per cent plus over the past three years. I suspect there will be at least one cyclical downturn before the completion of the airport.

Interest Rate Outlook

Forget about what various economists and talking heads think about where rates are going. This is what I follow pretty much all the time if I want to get a good understanding of where rates are headed.

It’s the ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve.

Say what?

In short, it is net sum of various bets regarding where the RBA may place the cash rate in future.

“Bottom line: the money markets don’t think rates are going anywhere this year.”

The futures contract is most often used as a hedging tool by the banking sector to cover themselves in case of cash rate changes.

Over time, it has been a rather reliable measure of what the market is thinking of the future in regards to interest rates. And while it has at times got it wrong, more often than not I have found it to be a reliable cash rate forecast tool.

I raise this now because since the rather benign CPI numbers from last week, money market interest rate expectations have decidedly changed.

Previously, it was expected that there would be two rate hikes in the first half of next year. One in February/March and another in June to take the cash rate back to 3 per cent. That second rate hike is now priced out of the market. Indeed, there is only a 50 per cent chance of an initial rate hike by April next year. 

Bottom line: the money markets don’t think rates are going anywhere this year. That’s what I think too and it is in line with public statements from the RBA that they see stability in interest rates for the foreseeable future.

About the Author

SQM Research is an independent property advisory and forecasting research house which specialises in providing accurate property related advice, research and data to financial institutions, property developers and real estate investors. It is founded and run by one of the country's most recognised and respected property analysts, Louis Christopher.

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