Housing Sector Leading Economic Recovery
The housing sector has far reaching linkages throughout the economy. From carpentry, plumbing, bricklaying, electrical, surveying, engineering, and concreting to financing and banking, amongst many other professions and trades.
Therefore a strong housing sector is the cornerstone of a strong economy. The latest housing data suggests a strong recovery in housing is underway. This will lead to a stronger domestic economy.
The housing sector's cycles of boom and bust coincide with that of the general economy. There are two things to note at the present time.
One is that we are coming out of the bust and therefore the cycle is turning back in favour of a boom. This cycle appears to occur every four years. The shortage of housing and high rents that continues around the country is an indicator of demand greater than supply.
Secondly, the massive stimulus from the Government as well as the RBA is almost certain to make this boom a reality. Tax cuts, First Home Owners Scheme and associated Bonus as well as drastic cuts to interest rates, has enticed many to invest into housing.
What this also tells us is that we have probably seen the end of further interest rate cuts by the RBA. The RBA have partially acknowledged this and have already started talking about over stimulation of the economy. The RBA governor noted this week that " the downturn we are having may turn out not to be one of the more serious ones."
This is after the most dramatic cuts to the Official Cash Rate in history, within the past 12 months!
With the economy stimulated as it is, longer term interest rates, which are set by the market, will rise. But this should be seen as a sign of economic growth and prosperity.
The housing sector has far reaching linkages throughout the economy. From carpentry, plumbing, bricklaying, electrical, surveying, engineering, and concreting to financing and banking, amongst many other professions and trades.
Therefore a strong housing sector is the cornerstone of a strong economy. The latest housing data suggests a strong recovery in housing is underway. This will lead to a stronger domestic economy.
The housing sector's cycles of boom and bust coincide with that of the general economy. There are two things to note at the present time.
One is that we are coming out of the bust and therefore the cycle is turning back in favour of a boom. This cycle appears to occur every four years. The shortage of housing and high rents that continues around the country is an indicator of demand greater than supply.
Secondly, the massive stimulus from the Government as well as the RBA is almost certain to make this boom a reality. Tax cuts, First Home Owners Scheme and associated Bonus as well as drastic cuts to interest rates, has enticed many to invest into housing.
What this also tells us is that we have probably seen the end of further interest rate cuts by the RBA. The RBA have partially acknowledged this and have already started talking about over stimulation of the economy. The RBA governor noted this week that " the downturn we are having may turn out not to be one of the more serious ones."
This is after the most dramatic cuts to the Official Cash Rate in history, within the past 12 months!
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With the economy stimulated as it is, longer term interest rates, which are set by the market, will rise. But this should be seen as a sign of economic growth and prosperity.