Buyer sentiment continues to be influenced by the combination of local market conditions and macro-economic factors. Dominating the media this week was the Reserve Bank’s (RBA) decision to lower the official cash rate by .25% for the second month in a row and the major bank’s reluctance to pass on the cut in full.
Prior to the announcement, it was clear the banks were under pressure, with an article in the Daily Telegraph saying all four majors had had their credit ratings slashed by the world’s largest ratings agency, Standard and Poor. Funding costs are already starting to surge according to fellow ratings agency Moody’s who warns that Australia’s banking system faces crucial challenges over the next year as the world economy slows.
Regional lender Bank of Queensland announced it would pass on the rate cut in full within an hour of the RBA’s announcement, but the major banks stalled, with an angry Treasurer Wayne Swan telling the Herald Sun customers should “walk down the road to get a better deal”.
The ANZ was the first of the big four to buckle to the pressure after two full days of silence, but the Courier Mail said their decision to pass on the full cut was a “bitter pill in shiny wrapping”. In an unexpected move, the ANZ has said it will now set its own schedule for interest rate reviews which will be up to ten days after the RBA monthly meetings. Consumer groups fear this will take pressure off the bank to pass on future cuts. Commonwealth, NAB and Westpac announced they would also pass on the full .25% shortly afterwards, although the article said there has been no indication they would follow the ANZ’s rogue move.
Overseas, European leaders met for a “make or break” two day summit late last week. According to the Australian newspaper, French President Nicolas Sarkozy said this was the last chance for the Eurozone to head off world-wide economic damage.
In the domestic property market, the latest finalised auction results from RP Data show clearance rates in Sydney and Adelaide dropped to just 44.5% and 32% respectively. Melbourne fared slightly better, with the clearance rate rising to 50%, while Brisbane remained level at 30%.
With just over a week until the market effectively closes down for the Christmas break and a high level of uncertainty prevailing over the coming year, we urge you to carefully consider all activity around your property.
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