Interest Rates Opening doors to Investing

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Australian investors and home owners should be rejoicing at the news that the current fixed rates on mortgage loans has hit a record low.

Early October, Commonwealth Bank released new fixed-rate loans starting at 5.39 per cent, the lowest offered by CBA for more than 22 years. APP (The Age) reported that the interest rate cuts has resulted in a rise of home loans approvals being granted with the value of total housing finance biggest in Queensland, New South Wales and Western Australia.

Does this mean that these areas are set to grow demographically as well as economically?

Unfortunately I can’t find anyone with a crystal ball to give me a definite answer however, judging from the borrowing and lending trend surrounding home loans, I think it’s safe to say that the current property market is prime with opportunities and the areas to investigate are the places where people are buying up.

Despite the negative press targeting the mining sector of late, Queensland and Western Australia are the Australian States predicted to see the strongest rates of employment growth over the next 30 years. A tell-tale sign that the Australian mining industry is not declining are the large number of major mining projects still underway or have been committed to start soon- Xstrata Coal Wandoan project (QLD), Australia Pacific LNG project (QLD), and Shell prelude FLNG project (WA) to name a few. Furthermore, these projects typically have construction phases over several years; hence supporting economic activity over that time.

The macroeconomic environment remains supportive of resources investment for now with strong demand emanating from China and elevated prices for commodities
– Deloitte Access Economics (DAE) ADF Posture Review, November 2011

One source I have found useful for my own research has been a report released by Deloitte Access Economics (DAE). Commissioned by the Australian Defence Force, the document details the longer term demographic and economic trends in Australia and provides forecasts of expected population, labour force and economic growth. Indicating that the Australian economy is thriving on the strength of China’s industrialising economy, the report goes to explain that although the resources sector has remained relatively stagnant, the demand for resource exports remain strong: “Queensland and Western Australia are on the right side of the resources boom at present, receiving very high prices for their resources exports”.

Before committing to an investment, it is always advisable to have clear objectives set out within your personal time line. Mapping out your property folio will help you pace growth and assist in risk mitigation by indicating opportunities where you can diversify your investments.

The way I see it, the low interest rates and affordable entry-level real estate opportunities are aligning elements to secure a solid long term (5-8+ year) investment. Where are you seeing an area of high growth potential? I’d love to get some feedback on this topic, so please email me or leave a post.

References:
CBA cuts fixed rates on mortgages – APP for The Age, 12 October 2012
Home loan approval rates at highest level this year – Stephen McMahon, News Limited Network, 15 October 2012
2012 Australian oil & gas projects summary – Jody Elliott, The Resource Channel, 29th March 2012
– Long term economic and demographic projections reports – ADF Posture – Deloitte Access Economics for Australian Defence Force, 24th November 2011

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