2011 - what's in store

7 interest rate increases in little over a year played a large part in ensuring that the local property market softened considerably towards the end of 2010. Add this to the significant downturn in international student demand due to the Australian Government's changes to visas, financial burdens placed upon students, and a strong aussie dollar, and the result is that the prices for apartments have slipped somewhat.

However, we are optimistic that the current malaise could be reversed very quickly. Resources, defence and education are still the 3 big games in town and we have heard that big things will happen in 2011 which will translate into a turnaround in demand for city apartments...

Latte Rates

The Reserve Bank Board has just increased rates from 4% to 4.25% - the 5th rise since October 2009. This means that a standard variable rate mortgage from BankSA from 9 April will carry a rate of 7.18% for existing and new residential loans. The Reserve Bank is concerned about a bubble in the housing market and the possibility of a breakout in inflation.

Treasurer Swan says interest rates are getting back to "normal" and Governor Stevens reckons they are trending towards "average" rates. If this is the a case, then a lot of homeowners would probably prefer "abnormal" or "below average" rates!

We noticed on Tuesday that a latte at our favorite city cafe increased by 20 cents a cup. Shouldn't it have gone down if interest rates have gone up to stifle inflation? Or do they need to set the interest rates even higher? Looking closely at Governor Stevens's press release, it is clear that he thinks interest rates are not yet "average" - perhaps this is a sign that there will be more rates increases in the coming months.