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A bank’s chief economist has warned that continued lift in Australia’s property markets will lessen the likelihood of rate cuts anytime soon.
Weighing in on the current property market, HSBC chief economist Paul Bloxham was considering the factors currently affecting house prices when he iterated that “the more and faster that housing prices rise, the less likely it is that the RBA will cut rates anytime soon”.
Calling it a “twist in this story”, he acknowledged the recent picking up of pace in housing price growth had occurred in spite of the Reserve Bank of Australia’s “above neutral cash rate setting”.
The chief economist for Australia, New Zealand and global commodities at HSBC said recent price figures and auction market results suggest market buoyancy, despite conditions having cooled a little towards the end of 2023.
“Although some households have come under pressure from higher interest rates, which has boosted listings, housing demand still appears to be strong relative to supply,” he pointed out, with a key driver coming from the population surge seen through much of 2023.
“So much so, we see undersupply as a key factor continuing to support housing price growth this year of 3 to 6 per cent nationally,” the economist said of HSBC’s stance.
That tight housing market, plus a relatively low rate of mortgage defaults, has created the environment that has led Bloxham to flag that “a still tight housing market with rising housing housing prices and rents is not the typical recipe for rate cuts”.
Outlining his expectations, the economist shared: “First, we expect that the RBA will judge that rising housing prices are a sign that the household sector is still doing OK in the face of the central bank’s tightened policy setting.”
“Second, the still tight housing market will also make the RBA concerned that rising rents will continue to be a strong contributor to inflation,” he continued.
And finally, Bloxham said “the RBA may also not want to deliver rate cuts when housing prices are already rising strongly, given concerns that it would be pump-priming a housing market that is already heating up”.
It’s all led HSBC to expect that “rate cuts are unlikely in Australia in 2024”.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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