The recent stock market instability has been more related to investor panic, than to any logic or reason. And you’re not about to see a stock market collapse — which has now been confirmed by Monday’s rebound, following 0.5% rate reduction by the US Federal Reserve.
Both here and in the US, company profits are strong and corporate borrowing is relatively low. It’s simply market positions that have been oversold, due to a sudden panic by some investors.
The fallout from the US sub-prime debacle should have marginal effect on the core banking system. Second-tier lenders may well need to significantly increase their rates to cover their losses — but the overall effect should be contained mainly within the residential sector. Although bond rates tend to govern the commercial lending rate — so you may still see a little volatility there.
The US still has some deep-seated issues to address. But I think you’ll find there is still a lot of life left in Wall Street for a while yet; and consequently, the Australian stock market too.
As such, you should see this confidence continue to flow into the Commercial property market.