RBA to Maintain Interest Rates on December 5; a survey Predicts 5% Growth in Australian Property Prices by 2024

Since locating a floor in January, Australian property prices have regained every 2022 loss, despite interest rates reaching a 12-year high. In addition, they are anticipated to increase by 5% next year and 8% this year, according to a distinct Reuters poll.

"We anticipate that the RBA will maintain a hawkish stance next week, but we do not anticipate any changes." "Therefore, they will talk up the possibility of rate hikes, but we do not believe they will actually implement them," said Rabobank senior strategist Ben Picton.

Twenty-eight of thirty economists, including those from Australia's four largest banks, predicted the central bank would maintain its official cash rate (AUCBIR=ECI) on December 5, according to an interest rate survey conducted from November 29 to December 1.

While the annual growth rate of consumer price inflation decelerated to 4.9% in October from 5.6% in September, this figure remained significantly higher than the RBA's target range of 2-3%.

In contrast, two economists forecasted an increase of 25 basis points.

Twenty-nine out of twenty-nine economists anticipate the RBA to maintain current interest rates through the end of March, with the remaining ones predicting a quarter-point increase by that time.

The Reserve Bank of Australia lagged behind many of its peers by one quarter when a 25 basis point cut to 4.10% in the fourth quarter of 2024 occurred, one quarter later than anticipated in a November survey and according to poll medians, rates remained unchanged until the end of September.

As rising demand exceeds supply, the Australian housing market, which is already one of the most expensive in the world, is anticipated to maintain stable growth.

Consistent upward revisions of average home price expectations in Australia this year—from a 9.1% decline in a Reuters poll conducted in February to an 8.0% increase in a poll conducted in December—illustrate the market's resilience despite rising interest rates.

"Earlier in the year, it was anticipated that multiple consecutive interest rate increases would have a significant impact on Australia's current mortgage holders." However, distressed sales were relatively minimised due to increasing cash buyers propping up the residential market and the Australian economy continuing to hold full employment," wrote Michelle Ciesielski at Knight Frank, who took part in the Nov. 16- Dec .1 survey of 11 property analysts.

"Compared to the significantly higher migration, the current limited number of new homes being built or being started by developers points to inevitably higher house prices being achieved in 2024."

The poll, which inquired about the outlook for home prices in Sydney, Melbourne, Brisbane, Adelaide, and Perth, showed expectations ranging between 3.5% and 7.0% growth for both 2024 and 2025.

Asked about how the ratio of home ownership to renters will change over the coming five years, all nine analysts who responded to the query said it would decrease.

"Affordability looks terrible right now because home prices are back to their record highs and interest rates are at their multi-year highs, which means you're kind of getting hit from both sides," said Diana Mousina, deputy chief economist at AMP.

"Affordability could improve if prices decline a little bit and it will also improve marginally if the RBA cuts interest rates. However, unless prices plummet by at least 30 percent, if not more, the situation will not greatly improve.