RBA expects price surge to end | JR Prosperity Partners


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RBA expects price surge to end

Earlier this month the Reserve Bank announced the official cash rate to stay at 0.10%, and RBA Governor Philip Lowe has made it clear that the banks board still plan to hold the cash rate as is till 2024, whilst also acknowledging that the ultra-low cash rate is a direct influencer in pushing up house prices. 

With national house prices, consistently growing every single week is all states, with expectations to jump up 20% this year. However, Mr Lowe and economists expect affordability constraints will start to slow the pace of growth. 

With the price boom to continue till at least the end of this year and into early 2022, it makes sense that as prices continue to increase, there will be many priced out of the current market all together. 

“While I hesitate to provide forecasts for the housing market, I think it’s quite likely we’ll see further increases in the next little while,” he told a federal parliamentary committee hearing. 

“It’s a global story. It’s not just in Brisbane or Sydney or Melbourne where prices are rising, it’s almost in every city around the world, and it’s largely because interest rates are low and they’re likely to stay low.” 

Mr Lowe said low interest rates continue to push prices up, but noted there were now factors at play that could start working in the other direction. 

“We’re building a lot of dwellings and the population is not growing as quickly, and every day the prices go up it’s harder for people to afford. 

“Ultimately there’s some point at which these things will start equilibrating and the big price rises come to an end, but I’m afraid I can’t forecast when that actually happens.” 

Greater Sydney’s extended lockdown has made the RBA’s position on rate changes even clearer, according to realestate.com.au economist Paul Ryan. 

Mr Ryan did not expect an early rate move before 2024, even before the latest lockdowns. 

“It was very unlikely before, and now I would say it’s definitely not going to happen,” Mr Ryan said.