RBA delivers September cash rate decision

While continuous discourse has circulated around persistently high inflation and elevated price pressures, the RBA has chosen to maintain the cash rate of the last 10 months.

Delving into the present economic climate, PropTrack’s senior economist Eleanor Creagh noted that the sustained pause in today’s cash rate decision “reflects the RBA’s desire to keep inflation on its path back to target, while balancing downside risks for growth and the labour market”.

“Though employment growth has remained strong and the unemployment rate held steady at 4.2 per cent in August, the labour market has softened over the past year,” she noted.

Creagh believes the continuation of high interest rates will soften price growth in spring, though not enough to flatline.

“Home price growth has persisted despite the higher interest rate environment, with the PropTrack Home Price Index indicating national home prices hit a fresh record in August,” she noted.

“Prices have now cycled through 20 consecutive months of growth, although performance differs significantly around the country,” she added.

According to Creagh, home prices are still expected to rise over spring, but mitigated by an uplift in choice, the uncertainty around timing of interest rate cuts and affordability constraints.

LJ Hooker Group’s head of research Mathew Tiller shared his belief that the next set of quarterly inflation figures, set to be released at the end of October, will be integral for determining the RBA’s next move and therefore home price trajectory in the months ahead.

“If the numbers are heading in the right direction, then we could see a rate cut before Christmas. If they remain high then it won’t be until early next year,” Tiller said.

“If the RBA does deliver a rate cut in November, then it is likely the spring selling season will be extended right to Christmas. It won’t be driven by FOMO, but there will be enough positivity to keep listings strong and buyers active,” he added.

But if the central bank’s board decides to hold off, as many are predicting it will, Tiller said that a rate cut at the start of 2025 would likely attract buyers back into the market, “tip the supply balance towards demand” and lead to “price growth starting to pick up again”.

Looking ahead into spring, Tiller commented that the real estate network has observed higher listing numbers across all Australian capital cities and regions, and predicted that talk of future cuts would likely boost buyer confidence heading into the spring market.

“We are seeing a lot of activity out there at the moment with the increased listings, but there isn’t an oversupply as buyer demand remains steady,” Tiller said.