October 08 -- PUBLISHER LETTER: Reason for optimism

 The UK has fared little better. House prices are continuing to tumble and the economy is now almost certainly in recession – a bleak prospect for the mortgage industry.

So what hand have we been dealt in Australia?

There is good reason to believe that we remain relatively shielded from the woes being experienced in the US and Europe. Asia is still standing on its own two feet and as long as this situation continues our domestic outlook should remain healthy.

For the time being unemployment has stayed defiantly low despite pessimistic predictions the numbers of jobless would rise.

A stable workforce is the backbone of consumer confidence and while sentiment remains fragile, there has been an encouraging response to the RBA’s September rate cut. Certainly no-one expected to see a surge in volumes on the back of a 25 basis point fall, but the initial response from consumers has been positive.

There appears to be little argument that rates will continue to head downward although economists are split as to how this may play out. The question now is this: which market segments are likely to respond first to future rate cuts?

Experienced investors are doubtless already eying the market as rentals continue to soar. And while there’s little chance of any major capital growth in most markets, the prospects for sound cash flow look rosy.

While the fundamentals are comparatively clear for investors, it’s harder to pick how other segments will react. First homebuyers are certainly feeling the squeeze of the rental trap but they may just wait a little longer to see where rates go.

The fact remains that there is still plenty of business out there for brokers who are prepared to roll up their sleeves. It will take dedication – and for the time being patience. But if good things come to those who wait, it will be worth riding out this current storm.

Alex Whitlock

Publisher