2016 Market Wrap Up

Housing prices remain a hot topic
Strong market demand has seen house prices continue to rise in major Eastern metropolitan markets, particularly Sydney (annual growth of 13%) and Melbourne (annual growth of 11%). Despite market demands, some concerns remain about the oversupply of apartments in Melbourne and Brisbane. In contrast, Perth and Western Australia has felt the effects of the end of the mining boom with a drop in prices (Perth – annual decline of 3.4%) and high vacancy rates.

As a result of the increase in prices and mortgage loan-to-value ratios, housing affordability has been a hot topic in 2016, despite interest-rate levels at record low levels. The big question is what decisions will the Reserve Bank make about interest rates in 2017? At this stage, there are predictions for a slight increase in official rates, with some of the banks already increasing rates for fixed rate loans.

Net debt levels lower
According to figures released by the Reserve Bank this month, net debt levels are dropping in Australia.

“What? But isn’t net credit increasing?” I hear you ask. And yes, that’s true, but it appears that deposits have increased to an extent that they reduce the net debt level on a nationwide level. Of course, it’s important to recognise that the people depositing and saving funds may not be the same people borrowing!

Current low interest rates mean that for some households there has been an increase in disposable income, and a resulting ability to save money to create a buffer against rising debt levels. For example, mortgage buffers in offset and redraw facilities have increased to a record 17 per cent of all outstanding loans – the equivalent of over 2.5 years of scheduled repayments at current interest rates.

However, as mentioned above, there is the possibility of interest rate increases, with several banks increasing fixed rates in November.

What’s happening in the labour market?
Despite the banks increasing fixed rate loans, labour market indications still suggest that low interest rates will remain for the time being. Wages growth is the lowest it has been since 1997, when the data was first collected, and while unemployment is not high, part-time employment is higher than it has ever been and artificially lowers the official unemployment rate.

Retail numbers strong
There have been back-to-back strong reports for the retail sector, suggesting that the economy could experience a reasonably good run-in to Christmas. In addition, new innovations such as Deliveroo and Uber Eats have helped cafes and takeaway stores to report strong performance with numbers up +7.3% over the year to October.

Shore Financial is ready to help you in 2017
Whatever 2017 brings, the team at Shore Financial is here to help ensure you get the best financial products for your circumstances. We’ve got access to the best loan products from over 25 lenders, plus financial planning, insurance and legal services. To book a no-obligation financial health check, call us on 1300 416 700.