Media Release | 7 February 2023
Commentary from The Agency's Managing Director and Group CEO Geoff Lucas on the RBA's February interest rate decision
"Today’s RBA decision to increase interest rates by 25 basis points to 3.35 per cent comes largely as expected," said Mr Lucas. "Due to recent economic data, and specifically US wages data, it’s possible we may see a further interest rate rise of 25 basis points at the March RBA board meeting before a period of stability. As it takes 2-3 months for rate rises to work their way into borrowers pockets, such a move would be fully impacting borrowers by May 2023. This will combine with almost 25 per cent of borrowers coming off fixed rates of circa 2 per cent onto rates of circa 6 per cent between June and December 2023."
"Buyers have just gone through the greatest rate of interest rate increases many have ever seen and this has created uncertainty and a reluctance to transact – whether that be buying or selling. We believe that uncertainty is coming to an end as borrowers see the RBA terminal rate approaching.
"There is material friction in the Australian residential marketplace, two of these friction points in particular are interest rate uncertainty and stamp duty. Friction retards the natural ability of Australian families moving homes as their requirements change. The removal of interest rate uncertainty reduces the marketplace friction to some degree and we believe this will lead to a greater propensity to transact in the second quarter of the 2023 calendar year (from April) – as consumers become more comfortable about what the future looks like and they can price in that change.
"Looking ahead in 2023 we expect national price reductions of 4-6 per cent with most falls in the next six to nine months. Those initial falls will be followed by a stabilisation in the market which will be aided by immigration most notably from China and consequently a more robust last quarter."
Looking at individual markets:
Brisbane is experiencing the greatest rate of house price reduction in the country right now and it is poised for a stronger recovery due to the relatively low cost of living and migration patterns. It is underpinned in the medium to long term by the 2032 Olympic Games. We believe these factors demonstrate strong value in the Brisbane and broader South East Queensland market.
Melbourne, is in the long term, tipped to be the most populous Australian city. Its rate of appreciation over the last 5 years has been significantly less than its competitor Sydney and we believe it therefore represents strong medium-term value. We therefore expect to see a stronger than normal recovery when the recovery comes.
Perth has remained very robust and we expect to see that market remain steady and growth to match the broader Australian market, subject, however to vagaries in the mining sector.