Industry Leaders Analyze What RBA Decision Means For The Real Estate Market
The Reserve Bank of Australia (RBA) kept its record liquidity rate at 0.1%, with real estate executives predicting that Australia’s boiling real estate market will start to balance out somewhat in the months to come. to come.
The RBA move shocked few people, with economists widely predicting that the cash rate, which has not changed since November 2020, will remain stable.
RBA Governor Philip Lowe has repeatedly stated that the cash rate will not rise until real inflation is sustainably within the target range of 2-3%.
Dr Lowe said the Delta outbreak had halted the recovery of Australia’s economy, but the impact had been uneven, with some sectors facing difficult conditions while others were growing.
“This setback in economic expansion in Australia is only expected to be temporary,” said Dr Lowe.
“As vaccination rates rise further and restrictions are relaxed, the economy is expected to rebound. Many companies are now planning to ease restrictions, and confidence has held up relatively well. “
Dr Lowe said house prices continue to rise, although turnover in some markets has declined more recently.
“The growth of home loans has accelerated due to stronger demand for credit from homeowners and investors,” he said.
“The Board of Financial Regulators discussed the medium-term risks to macroeconomic stability of rapid credit growth in an era of historically low interest rates.
“In this environment, it is important that lending standards are maintained and that loan sustainability cushions are appropriate. “
GEOFF LUCAS, THE AGENCY
Agency chief executive Geoff Lucas said that over the next few months the very hot real estate market will begin to balance itself out.
He said recent CoreLogic figures showed that over a seven-day period, the number of market benchmarking reports ordered jumped 31% from the same period last year.
“When that number increases, it means agents are called in for assessments, and that means suppliers are looking to potentially enter the market,” Lucas said.
“It’s motivated by getting out of lockdown and seeing the light at the end of the tunnel.
“It will move the market a bit more towards equilibrium.”
Mr Lucas said it has been “largely” a sellers’ market so far and buyers have struggled, but with the increase in the number of properties coming to market, rules of the game should stabilize a bit.
“Demand will remain robust because people now feel more comfortable that interest rates are going to stay relatively low for a bit longer,” he said.
Mr Lucas said the rate of growth in house prices will slow down next year.
“We expected domestic price growth for calendar year 2022 to be between four and six percent,” he said.
“We are seeing a decrease in the rate of price growth.”
Mr Lucas said that during the September quarter, CoreLogic figures showed the number of unit transactions increased by 42% nationwide compared to the same quarter last year, while the number of real estate transactions had jumped 21%.
“That said the end of the market is getting more active, and that’s also really the affordability issue (comes into play),” he said.
“During the January-July period, there was also a 45% increase, from a low base, in the number of investment loans by first-time homebuyers.”
Mr Lucas said buyers are “investing rents”.
“They rent where they want to live and buy where they can afford to invest,” he said.
“It’s interesting because they are more and more comfortable with the fact that the rates will be lower for longer, which creates a more attractive proposition for investment properties.”
MANOS FINDIKAKIS, EVALUATION GROUP
Eview Group chief executive Manos Findikakis said the group’s mortgage arm, Tango Loans, feared first-time homebuyers’ mortgages could amount to around six times their annual salary.
“We don’t want it to go too high,” he said.
Mr Findikakis said the key to the equation regardless of interest rates was employment, and if buyers didn’t have jobs, they wouldn’t get a loan.
But he pointed out that the group hasn’t seen a lot of struggling sales.
“The main criterion for us, and what we’re really trying to take the pulse of, is that people lose their jobs?” Said Mr. Findikakis.
“And we haven’t seen that yet.
“We haven’t seen these distress sales where people say, ‘From afar I lost my job and I have to sell my house.’
“On the contrary, people are doing very well in certain industries and they are increasing their workforce. They enlarge because they don’t spend (the money) on anything else, they don’t travel, and they don’t plan to travel for the next 12-24 months, so they enlarge and change that tree. “
Mr Findikakis said while many were talking about tight inventory levels, he said it was the opposite.
“It’s a myth,” he says.
“We’re actually up 40% of sales, the number of homes sold, compared to 2019.
“On average in Australia there are 500,000 real estate transactions per year, and this year there were 600,000.
“There might not be more inventory at one point because they are selling so quickly, but there are actually more homes coming onto the market.”
ANDREW COCKS, RICHARDSON & WRENCH
Richardson & Wrench chief executive Andrew Cocks said Australia’s economic momentum will strengthen as lockdowns are removed, domestic travel resumes and, in 2022, international travel resumes.
“This bodes well for the real estate market in Australia; However, the current rate of price increase seen in many parts of the country is clearly unsustainable, ”he said.
“There will likely be intervention to restrict lending with the Board of Financial Regulators due to the publication of options to cool the loan market over the next two months.
“This will likely coincide with an increase in ad volumes as potential sellers feel more comfortable selling their property in a no-foreclosure environment, so we’ll likely see fewer buyers and more inventory occurring over time. almost at the same time with foreseeable consequences.
Mr Cocks said the “big unknown” in the real estate equation would be the level of international activity, as tourism, international students, business travel and permanent migration would all be recommended next year.
“Tourism activity is likely to recover fairly quickly, limited only by airline capacity and overly cautious government intervention, with international students, business travel and immigration levels likely increasing more gradually over the course of the year. the next few years, “he said.
“The impact of any potential limits on domestic lending is likely to be offset by strong near-term growth in the economy with the additional boost provided by the more unpredictable re-emergence of international markets continuing to support the domestic real estate market as the global economy is rebalancing itself.
Mr Cocks asked how long such conditions could be maintained and said there were already “clear signs” that the rate of price growth was retreating.
“However, the upside potential in so many sectors means that based on current and very likely future monetary parameters, there does not appear to be a major correction on the horizon anytime soon,” he said.
“The real test will come when interest rates start to move north again, and the magnitude and speed of future rate hikes will largely determine how the residential real estate market performs as we head north. mid-decade. “