The 2012 federal budget is too weak to prevent further rate rises. This means investment property market will remain flat in 2012 as the interest rate is most likely to rise at least once before December 2011.
41 per cent of stock market investors in the latest Investor Pulse survey by Colmar Brunton thought the 2012 budget as too weak to prevent further interest rate rises. Only 6 per cent said the 2012 budget would take the heat off the Reserve Bank to lift rates.
Investors, in fact, are bracing for those higher rates. A remarkably strong 85 per cent of those polled expect the Reserve Bank to lift rates before the end of 2011, and almost half reckon the bank will raise twice before December is out.
This morning, financial markets were rating the prospect of a rate rise at the RBA’s June meeting as a 17 per cent chance. Those investors are rating about a one-in-four chance that the RBA’s cash rate will be 5.25 per cent in 12 months’ time, according to Credit Suisse data.
Interestingly, investors surveyed by Colmar Brunton are more cautious about the prospects of the overall Australia economy.
When asked where they thought the Australian economy would be by year’s end, only 13 per cent thought it would be strong.
Indeed, almost one-third of investors considered the economy likely to weaken by the end of 2011, the survey found.
I believe this means the property investment market will remain flat for a while. If what the investors expected is true, we will see a declining market and property price in 2012.