Media Release | 7 May 2024
Commentary from The Agency's Managing Director and Group CEO Geoff Lucas on the RBA's May interest rate decision.
After much debate and speculation from economists and market observers over the past six weeks the RBA kept the cash rate on hold at 4.35 per cent today as expected.
What’s clear is there is increasing and widespread recognition that services inflation is proving harder to move than originally anticipated in Australia and many of our trading partner economies. The most recent CPI has underpinned this, and the upcoming July tax cuts will add to inflationary pressures. As a result we are seeing more economic forecasts for interest rates to remain at higher levels for longer which is in direct contrast to much of the media hype around late last year and early this year that the Australia would be looking at several interest rate cuts during 2024.
It‘s now becoming increasingly clear that not only has the likelihood of cuts in 2024 diminished - but the possibility of an increase later this year is starting to grow.
Such an outcome is subject to future data and it’s the job of the RBA to balance a number of factors. Seldom before has there been such a confluence of dynamics including cost of living increases, a housing affordability and supply crisis, record low unemployment, unprecedented rate of interest rate increases, as well as geopolitical instability.
We’re at or near the end of an aggressive tightening cycle, and despite the number of variables we are entering a period of far greater interest rate stability.
What we do know is Australians looking to purchase residential real estate are acting with more certainty and vendors are seeing a safter environment to transact. This is because they feel the market as a whole is not going to undergo the same level of price volatility as we’ve seen in recent periods and both buyers and sellers have more certainty around price.
As a result we’re seeing an uplift in listings nationally, with the latest Corelogic data showing a 23 per cent increase in the rolling 4 week listings numbers compared to the previous corresponding period. We expect this increase in supply will continue throughout autumn and into a strong winter of activity across the country.
With interest rate volatility certain to be far lower than the past two years, demand and supply will continue to ascend as the key drivers of price movements. Although on a national basis, price volatility will likely continue to fall, we are seeing significant variability in price movements across different markets, with Perth, Adelaide and Brisbane, annualised 24 per cent, 13.6 per cent and 13.2 per cent growth respectively, due to low supply and strong demand. These three cities are far outperforming the national annualised growth of 7.2 per cent.
Melbourne, with zero growth in the last quarter underperforms all national capital cities and is beginning to present opportunities as it progresses to surpass Sydney as the most populous Australian city by 2031.