The Reserve Bank of Australia (RBA) will continue to lift interest rates until it is confident that higher inflation will not become entrenched, the governor of the RBA, Philip Lowe, told the House of Representatives Standing Committee on Economics on Friday, 16 September.
However, it said it will consider a 25 or 50 basis points (bps) at its next meeting, after the 25-bp option was not considered in August.
September marked the fifth consecutive cash rate hike, away from its record low 0.1 per cent, taking the cash rate to 2.35 per cent, as it attempts to curb runaway inflation.
“At some point, we won’t need to increase rates by 50 bps at each meeting and we’re getting closer to that point,” he told the committee.
He assured that rate increases will be done in a way that keeps the economy on “an even keel”.
“The Reserve Bank Board expects that further increases will be required to bring inflation back to target. We are not on a pre-set path, though,” Dr Lowe reiterated.
“At some point, it will be appropriate to slow the rate of increase in interest rates and the case for doing that becomes stronger as the level of interest rates increases.
“As I have said previously, the size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market,” he continued.
Dr Lowe also spoke of the rapid increase in interest rates from “extraordinarily low levels” during the pandemic, and touched on the bank’s previous communication that interest rates wouldn’t rise until 2024, which was widely interpreted as a promise.
“We are currently working through the implications of this for our future approach to forward guidance and communication more generally,” Dr Lowe said.
Moreover, he touched on the criticism that the RBA provided too much support during the pandemic, arguing that “in those dark days of the pandemic, the Reserve Bank Board judged that the bigger policy mistake would have been to do too little, rather than too much”.
“If we had done too little and the worst had occurred, Australians could have paid a heavy price. As things turned out, thankfully, the worst was avoided. So it has been appropriate to unwind the very easy monetary conditions of the pandemic years and address the higher inflation that has emerged so quickly,” Dr Lowe said.
FIVE THINGS TO KNOW FOR THE 2022 SPRING SELLING SEASON
Traditionally, spring is a time of fervent activity for the Australian property market as sales and listings increase. However, spring 2022 is expected to hit a little differently amid higher mortgage rates, weak consumer sentiment, stretched household budgets and weaker buyer interest.
1. New listings and auctions will rise in the coming weeks
In the 28 days to September 4th, there were 35,213 new listings advertised across Australia, which is higher than the equivalent period in 2021, 2020 and 2019.
2. The seasonal uplift in new listings will vary between regions
In the five years prior to the pandemic, new listings campaigns nationally have increased 19.6% on average between winter and spring. The seasonal bump varies between cities, with cooler climate areas like Canberra (42.4%), Adelaide (33.7%) and Hobart (31.6%) typically seeing a larger seasonal effect than more temperate markets.
Given home values across Adelaide have only just passed a peak in value, many sellers across the city may show interest in ‘cashing in’ this spring selling season. Despite a -0.1% fall in the CoreLogic Home Value Index for Adelaide, values are still almost 45% higher since the onset of COVID in March 2020.
3. It won’t be the bumper spring selling season we experienced last year
2021 had a particularly ‘bumper’ spring selling season, which is unlikely to be replicated this year. CoreLogic estimates there were 154,294 new listings added to the market through spring 2021, higher than the previous decade spring average of 144,985. Late 2021 also saw record-breaking auction volumes, with the highest count of auctions on record over the week ending December 12th (4,981).
More listings were likely concentrated at the end of 2021, because rising COVID cases and extended lockdowns across parts of the country would have made it difficult to sell from June to early October. In other words, sellers were playing ‘catch-up’ as pent-up demand from vendors was unleashed once lockdowns ended. In addition, annual capital growth rates averaged 21.3% nationally through spring last year, creating a big incentive for vendors to ‘cash in’ on price booms.
Coming into spring 2022, market conditions are very different. Buyer appetite is falling against higher interest rates, properties are taking longer to sell, and vendors are having to offer greater price discounts in order to get deals done
4. Long-term owner-occupiers more likely to sell
An interesting feature of a housing market in decline is average hold periods of sold properties rise.
5. Sellers will have to listen to buyer feedback, and be flexible on price
While both buyers and sellers become more active during the spring selling season, this doesn’t make it a seller’s market. Properties are taking longer to sell, with median days on market up to 33 days in the three months to August, which has increased from a low of 20 days in November last year. The discounts between initial listing prices and contract sale prices (otherwise known as ‘vendor discounting’) has also become larger with the median discount sitting at -4.0% nationally. Similarly, auction clearance rates across the major auction markets are consistently below average.
Serious vendors will need to be realistic about their price expectations and ensure they have a quality marketing campaign behind the property in what is likely to be a more competitive selling environment through spring and early summer
BUSIEST AUCTION WEEK SINCE LATE JUNE WITH 2,190 HOMES TAKEN TO AUCTION ACROSS THE COMBINED CAPITALS
There were 2,190 auctions held across the combined capital cities this week, up from 1,918 over the previous week and 1,672 this time last year making it the busiest auction week since late June. Of the results collected so far, 62.5% were successful, up slightly from the previous week’s preliminary clearance rate of 61.7%, which revised down to 59.7%, the highest final clearance rate seen since the week ending 22 May 2022 (61.3%). This time last year, 75.1% of auctions were successful. An early view of auction volumes indicate that there will be significantly less activity next week with around 1,400 auctions currently scheduled across the combined capitals. The lower volumes can be attributed to several public holiday long weekends around the country, along with the AFL Grand Final in Melbourne.
Brisbane was the busiest auction market of the smaller capitals this week with 168 homes taken to auction across the city, followed by Adelaide (132) and Canberra (102). There were 20 auctions held in Perth this week, and just one in Tasmania. Adelaide recorded the strongest preliminary clearance rate (75.6%), followed by Canberra (65.8%) and Brisbane (52.8%).
RAMS NORTHERN ADELAIDE – PATRICK WHITE
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What’s more, if you can’t make time to meet at the office, they’ll happily meet you at a time and place that suits you. Or, simply call the team and speak to them directly whenever you need.
You’ll also get their local market knowledge and easy to understand step-by-step home loan advice. If you’re eligible for the government grants or incentives, they’ll even help with that.
How RAMS Northern Adelaide can help:
- Complimentary home loan health check.
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Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate