dailyreckoning.com.au / By Greg Canavan / January 3rd, 2013
The RBA’s interest rate cuts don’t seem to be working. It’s a bit player in the global currency war, and Australia’s economy will suffer the consequences. Manufacturing’s woes are well known. But the RBA’s move to ultra-low interest rates was supposed to perk up Australian house prices, and therefore the housing market.
But data released yesterday by RP Data-Rismark suggests the Australian housing market continues to fall. The Sydney Morning Herald reports that:
‘Australian home values fell for the second year in a row in 2012, marking the worst performance for the national market in 16 years
The 0.4 per cent decline has come on the back of a 3.8 per cent fall the previous year, according to analysts RP Data-Rismark.’
That’s not good news if you’ve bought a house in the past few years. Housing is a highly leveraged investment. For new purchases, the finance structure can be as high as 90% debt, 10% equity. So a 10% fall in house prices wipes out your equity.