Glass Half Full

For months I’ve been arguing that the overly cautious and often negative sentiment surrounding the property market has been unwarranted and not backed by the fundamentals.

I am delighted that the country’s top banker – Reserve Bank Governor Glenn Stevens – last week reinforced this view in his “Glass Half Full” speech.

Speaking after the latest interest rate cut, Mr Stevens called for the right kind of confidence to be installed, rather than negative sentiment that continues to call for interest rate cuts to stimulate consumer confidence and boost the property market.

The benchmark interest rate set by the Reserve Bank is now at a low 3.5 percent. And whilst the commercial banks will lend over this rate (that’s their business model), the time for sitting on the sidelines of the property cycle and waiting for it to fall even further are over.

The message is this: things are good, the economy is strong and waiting around to see whether the bank will further stimulate borrowing levels by dropping interest rates is unwise.

In my opinion, now is the time to look through the cycle and for considered investor participation and smart upgrade buying.

The Reserve Bank has been cutting the rate since November in moves designed to make consumers feel more confident but at the same time, wanting to avoid creating the expectation that property prices would start rising, Mr Stevens told an audience in Adelaide last week.

Instead of creating a situation which could lead people to taking on too much debt, the cuts are designed to create “the right kind of confidence” and stimulate sustainable investment.

Mr Stevens noted that consumers are standing on the sidelines in a kind of “irrational unexuberance” – a backlash to the years where “irrational exuberance” led to concerning personal debt levels.

And whilst Mr Stevens warned that among the structural shifts we are experiencing in our economy is that fact that the period of rapidly rising asset and house prices is over, that’s actually a very good thing for investors.

Property is still a great investment especially in WA where the economic growth is the best in Australia, rental growth is solid, property prices have stabilised, there’s increasingly attractive finance rates, housing demand growth and other favourable conditions.

The Reserve Bank’s Stevens also noted that observations that the economy really isn’t doing that well aside from mining were also incorrect. We’re actually spending MORE the data shows; it’s just that we’re not spending it on the same things. We’re spending on travel, health and education. But we’re also saving a bit more and using our credit cards a bit less. Two behaviours that bode well for the future strength of our economy and hence, the property market.

As Mr Stevens so appropriately put it; the glass really is (at the very least) half full, particularly in WA, so it’s time to make a considered choice in the property market.