RBA Rate Hold, Rising Land Prices, & Housing Trends
Weekly Real Estate Market Update with Leigh Martinuzzi MPG
This past week, the Reserve Bank of Australia decided to keep the cash rate on hold for the sixth consecutive meeting, maintaining a ‘wait-and-see’ approach. Last week’s CPI results were in line with expectations, with headline inflation rising from 3.6% to 3.8% annually. Trimmed mean inflation, the RBA’s preferred measure, fell for the sixth consecutive quarter but still came in slightly higher than expected at an annual rate of 3.9%.
Governor Bullock has confirmed that a rate cut in the near future is highly unlikely based on current data, although the Board is keeping all options open.
Despite stable interest rates being generally positive for borrowers, this decision is not expected to significantly boost housing demand. CoreLogic’s Research Director, Tim Lawless, noted that the quarterly rate of core inflation easing back to 0.8% in the June quarter aligns with the RBA’s forecast. Additionally, a slowdown in job growth and a slight increase in the unemployment rate contributed to the decision to keep rates steady.
The recent growth in property prices has been driven more by low supply, tight rental conditions, and demographic factors rather than consumer sentiment. However, these factors are now losing their impact, with home sales easing as affordability becomes more challenging, migration slows, and rental momentum diminishes.
CoreLogic’s national Home Value Index (HVI) showed a slowdown, with quarterly growth decreasing from 3.3% in June last year to 1.7% in July 2024.
Looking ahead, the RBA’s next movement in interest rates is likely to be downwards if the inflation trajectory continues to ease. However, affordability pressures and a potential housing supply response may temper price growth even as rates decrease. The timing of a rate cut remains uncertain, with some forecasts pointing to November this year and others to February next year.
Ms Tindall from RateCity.com.au advises homeowners to prepare for the possibility of another rate hike despite many economists predicting the next rate change will be a cut. Asking your bank for a rate cut and maintaining your monthly repayments can provide some cushion against potential future rate increases.
Urban land prices have seen a dramatic increase, doubling from around $200,000 in 2014 to over $400,000 in 2024. The average land size has decreased from 500m² to about 440m², while prices per square metre have surged from around $450 to $930. This reflects the growing competition for available land and the escalating costs of urban spaces.
Logan and Ipswich are leading the charge in land sales, accounting for 44% of total sales. Moreton Bay follows with 21%. Despite its rapid population growth, the Gold Coast lags with only 2% of total land sales, highlighting a significant supply-demand imbalance in one of Australia’s largest urban markets.
Nationally, house prices have risen for 17 of the last 18 months, posing challenges for first-home buyers, compounded by skyrocketing rents. According to Dr Andrew Wilson’s latest My Housing Market Rental Report, capital city rental markets showed slight increases in vacancy rates over July. However, rents for houses continue to rise, albeit at a slower pace, while unit rental growth has declined.
Despite a slight increase in investor activity, there is not enough new rental accommodation to meet the expected demand in the upcoming spring season. This means rents are likely to keep rising, providing little relief for tenants.
Over the twelve months to the June 2024 quarter, CPI rose by 3.8%, up from 3.6% in the March quarter, marking the first increase in annual CPI inflation since December 2022. Significant price rises were observed in housing, food, clothing, and fuel costs.
Most economists now anticipate the RBA’s next move will be an interest rate cut rather than an increase, with forecasts from major banks suggesting cuts between November this year and May 2025.
Auction results remained solid with a national clearance rate of 63.3%, up from 58.2% the previous weekend. Despite high midwinter listings, the beginning of August marks the transition into the spring selling season, which could see an uptick in market activity.
As we navigate these fluctuating market conditions, it’s essential to stay informed and prepared. Whether you’re a buyer, seller, or investor, understanding these trends can help you make more informed decisions.
For more detailed insights and personal consultations, feel free to reach out. Stay tuned for next week’s update!
Connect with Leigh and the team here.
