August cash rate call provides clarity for spring market

With the Australian Bureau of Statistics (ABS) data showing at the end of June that the Consumer Price Index (CPI) had risen 4 per cent in the 12 months to May, up from a 3.6 per cent rise in April and 3.5 per cent in March, speculation had risen that the RBA would feel forced to enact another hike.

Even so, many, such as the Real Estate Institute of Australia, noted that the monthly CPI indicator was not as comprehensive as the ABS’s quarterly inflation data, and urged calm among mortgage holders and prospective buyers worried about their ability to service increasing loans.

A cautious view proved prudent late last week when ABS data for the June quarter 2024 revealed a quarterly rise of 1 per cent and an annual rise of 3.8 per cent, allaying inflationary fears for the short term.

Cameron Kusher, PropTrack’s director of economic research, noted that “the job is certainly not done on inflation”, but said that spring selling season was expected to be strong, even as home prices were reflecting the impact of sustained high mortgage rates.

“The rate of growth in home prices has consistently slowed over the past five months and we continue to see the lowest number of annual dwelling approvals in more than a decade.”

“Despite slowing price growth, more properties are being listed for sale and sales volumes remain robust,” he said.

Even so, Kusher commented that another rise could not be written off, with inflation “still too high and rising at too fast of a pace to bring it into the target range”.

Kusher added that the latest call provided some clarity for the real estate industry, with “stable interest rates likely to support vendor and purchaser confidence as we head into the busier spring period”.

LJ Hooker Group’s head of research, Mathew Tiller, agreed that the spring selling season was looking positive, even as price growth moderated.

“Looking ahead, the RBA is likely to maintain the current cash rate for the remainder of 2024 which will give both buyers and sellers confidence,” he said.

Tiller commented that the real estate network had seen a surge in the number of property appraisals requested since the start of winter, which he attributed in part to the speculation of a further cash rate increase.

“These appraisals have likely included home owners and highly leveraged investors considering their options, including downsizing their mortgage in the face of ongoing high interest rates,” Tiller said.