On November 3, the Reserve Bank of Australia (RBA) kept interest rates at the record low level of 2 percent. Reserve Bank governor Glenn Stevens believes any impending rate change would see interest rates drop
further rather than increasing. That’s good news for the corporate building sector, which could otherwise struggle to absorb the impact of rate increases.
Corporate Builders Express Concerns
Jim Whiting, a corporate building executive, told the Sydney Morning Herald he worried about the impact
of potential rate increases. He said interest rates must remain low for a lengthy period, as many corporate builders will struggle to absorb higher rates.
Why Are Corporate Builders in Such a Precarious Position?
According to the Sydney Morning Herald, Australia’s economy is “subdued.” This is making many corporate players and commercial business cautious of investing in new infrastructure. Margins are also already tight in the commercial sector, so commercial builders cannot afford to have their profits further depleted by higher interest rates. Some small corporate builders, like Adelaide’s Tagara Builders, have already collapsed due to these harsh economic conditions.
The instability of some smaller corporate builders can also make commercial clients reluctant to invest. For your peace of mind, contact TPM Builders, a solid commercial construction firm with more than 13 years’ industry experience, on 1300 733 891. You can count on TPM Builders to complete your commercial project on time and to the highest standards.
When is a Rate Rise Likely?
While Glenn Stevens’ words should give the construction industry hope, many are still speculating about when rates will inevitably rise. Will they remain low until the corporate building industry is in a stronger position? The Commonwealth Bank predicts the RBA will not raise interest rates
until late 2016, while Stephen Walters, JP Morgan’s chief economist, suggests they could stay low until 2017.
Given its financial state, the corporate building sector will hope the economists are correct and the RBA does not raise interest rates above their current levels in the near future.
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