Media Release

Grim outlook for first home buyers: property prices set to rise further in 2015

  • Monthly Reserve Bank Survey shows all 37 experts expect no change to the cash rate on Tuesday
  • Three experts are forecasting the cash rate to fall further next year
  • Bad news for first home buyers: majority are betting on house prices to continue to rise in 2015

November 28, 2014, Sydney –The outlook for first home buyers is grim, with property prices expected to continue to rise next year, according to new research conducted by one of Australia’s biggest comparison websites

The Reserve Bank Survey, now with 37 leading economists and experts – including from all four major banks – all expect the Reserve Bank to keep the cash rate on hold at 2.50 percent at its last board meeting of the year on Tuesday, December 2, 2014.

There were three new experts that joined the panel this month, cementing its position as Australia’s biggest Reserve Bank Survey:

  • Stephen Koukoulas, Market Economics
  • Peter Boehm,
  • Scott Pape, Barefoot Investor

Interestingly, three of the 37 panellists (8 percent) are forecasting the cash rate to drop further next year, including Andrew Wilson (Domain Group), Stephen Koukoulas (Market Economics) and David Scutt (Scutt Partners). The remaining 34 experts (92 percent) are forecasting the next cash rate movement will be an increase.

Regardless of the direction, the vast majority (94 percent) of experts are expecting the cash rate to move next year, with just two experts (6 percent) forecasting the next move to be in 2016 – James Bond (Financial Services Council) and Noel Whittaker (QUT Business School).

FINAL fin-rba-cashrate-piechart

Michelle Hutchison, Money Expert at, said the survey showed that wider economic pressures were impacting the cash rate predictions.

“Of the 37 experts, many raised several key issues that influenced their predictions including the need for stability, a slow economy, a weakening Australian Dollar and no unexpected movements in the past month.

“It was also interesting to find some experts in the survey discussing the reality of a rate cut next year, with factors that could occur such as a falling housing market and slower growth in China and other foreign economies.

“There is a definite shift in the direction that the cash rate could take, with last month’s survey results showing all 33 experts were forecasting the cash rate to rise next year, including one expert (Andrew Wilson, Domain Group) predicting a rate cut before an upward cycle begins.

“But now there are three experts on the panel who are betting on a rate cut and others citing a possibility of a drop.”

Despite most of the experts betting the cash rate will rise next year, 69 percent believe property prices will continue to climb.

“If you’re a first home buyer struggling to get into the property market this year, next year isn’t looking to get any better.

“Most of the experts in the survey are expecting property prices to continue rising however, they don’t expect the higher costs will dramatically impact the first home buyer market. Two in three (64 percent) are expecting the same level of first home buyers next year compared to this year, with only five expecting fewer first home buyers.

“There were also 14 percent of respondents who expect property prices to stabilise, while 17 percent are betting on property prices to fall next year.

“With the national median property price across our capital cities hitting $545,000 in October – 8.9 percent higher than the previous year – it’s a good time to jump into the property market if you are prepared. But there’s no point in rushing in you’re not ready, because over-stretching your budget could have serious consequences if interest rates rise next year. Reading a first home buyer guide can be a great way to assess if you can actually afford to take out a home loan before rates move.”

Capital CityMedian dwelling priceYoY Growth

Sydney $680,000 13.1%
Melbourne $555,000 8.9%
Brisbane $442,000 5.6%
Adelaide $395,000 4.3%
Perth $525,000 3.4%
Hobart $315,000 4.4%
Darwin $550,000 5.0%
Canberra $510,000 0.9%

Source: RP Data CoreLogic October 2014 Hedonic Home Value Index Results October

What our experts had to say in the Monthly Reserve Bank Survey:

  • Melissa Browne, A+TA: A period of stability is needed. Aussie Dollar is still high and other than the property market still potentially overheating in some areas, this isn't enough to raise rates. With a growing demand for property by SMSF, I can only see a continued climb in house prices.
  • Garry Shilson-Josling, AAP: The economy is growing too slowly to consider raising the cash rate to cool the housing market, but cutting the cash rate now would not help much over the time frame the economy will be slow. The next move in rates is likely to be up, but there's a small but very real chance of a cut if the housing market tanks, or China hits a rough patch.
  • Shane Oliver, AMP: Nothing has changed since the last meeting to justify a move. Property remains strong but growth remains subpar and inflation benign. While home prices are likely to keep rising in 2015 the pace of increase will likely slow, particularly in Sydney and Melbourne./li>
  • Warren Hogan, ANZ: The economy is playing out largely as expected and the level of interest rates is appropriate for the outlook for the economy.
  • Peter Munckton, Bank of Queensland: Below trend growth means low rates but lower currency and higher house prices means no rate cut.
  • Steven Pambris, Bank of Sydney: The economy continues to be soft.
  • Scott Pape, Barefoot Investor: The Reserve Bank has said that they aren't going to be doing anything with the cash rate. They are sitting on their hands. I don't think they will do anything for six months, however things can change.
  • David Bassanese, BetaShares: We have a firm property market and weakening Australian Dollar.
  • Richard Robinson, BIS Shrapnel: Employment and economic growth are weak, unemployment is rising (or stable above 6%) and inflation is well contained.
  • Michael Workman, Commonwealth Bank:Inflation measures have a downward bias. Unemployment rate is elevated, with no sign of falling. The stronger US Dollar and weaker AU Dollar is positive for domestic activity levels through 2015
  • Andrew Wilson, Domain Group: No impact from any change until next year. House price growth will track around inflation depending on local demand and supply drivers.
  • James Bond, Financial Services Council: Inflation is under control, productivity is rising and real wages are falling. This is giving the RBA the bandwidth to focus on other issues, and at the moment that is the exchange rate.
  • David De Ferranti, FXCM: Subdued inflation expectations and a soft local labour market are likely to keep RBA policy highly accommodative over the near term. Yet concerns over the risks posed by rampant speculative lending in the housing market may continue to keep a cut off the cards.
  • Scott Morgan, Greater Building Society: There has been nothing this month to create a shift in the RBA’s well-documented commentary on the need for a period of stability in rates. The RBA is cognisant of a potential build-up in asset prices and the flow on risks that causes. Concern about these risks, an upward move in US rates and improving economic indicators in the Australian Economy around GDP, unemployment and retail sales are all factors that provide scope for rate increases inside the next nine months.
  • Paul Williams, Heritage Bank: RBA has signalled it is on hold for an extended period.
  • Paul Bloxham, HSBC: Growth is still below trend and inflation is well contained.
  • Michael Witts, ING Direct: The economy remains in transition and if anything there are increasing signs that the economy is strengthening on a broad basis.
  • Paul Clitheroe, IPAC Securities: No compelling evidence for a move. With property slowing, the RBA would be tempted to drop to a lower Dollar, but on balance does not want to reheat the property market.
  • Grant Harrod, LJ Hooker: There have been no major unexpected economic movements over the past month. The rate of house price growth has begun to slow thanks to listings rising to meet buyer demand. This should see the RBA carry its neutral policy position into the New Year. This takes pressure off the RBA and provides it with more room to move should it need to further stimulate the economy. We expect house prices to rise due to ongoing demand and low interest rates, but prices will rise at a slower rate to what was recorded over 2014.
  • Stephen Koukoulas, Market Economics: The RBA is very slow to acknowledge the subdued nature of the economy at present and has an unhealthy obsession with Sydney house prices.
  • John Caelli, ME Bank: The RBA is unconcerned about inflation, unemployment is still high and the Dollar remains high.
  • Glenn Levine, Moody’s Analytics: The economy is still weak outside of housing. The labour market is loosening and wage growth has slowed. Yet there is no scope for a rate cut as it would reignite the housing market, which may now be slowing.
  • Lisa Montgomery, Mortgage & Consumer Finance Expert: It is likely that the RBA will keep interest rates low for some time to come. Job ads are up, retailers are predicting a solid Christmas sale period, most economists are forecasting a softening Aussie Dollar and consumer confidence continues to rise slowly. All positive signs for the economy as we head into a new calendar year.
  • Huw Bough, My State Bank: Whilst the transition away from resource-related, investment-driven growth is underway, a number of sectors remain lacklustre, in particular non-mining business investment, and households remain fairly cautious. This points to a situation where rates will most likely be on hold for another 6-12 months.
  • Alan Oster, NAB: ...Despite its decline, the Australian Dollar was still regarded as well above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months. The RBA still believes that a period of stability in interest rates is the most prudent policy for the time being. We still expect no change in the cash rate until the end of 2015. While there are tentative signs of an improvement in household spending, they do not yet signal a sustained change in household and business conditions. In the absence of any major surprises, the cash rate is unlikely to rise until late next year as monetary policy commences its return journey to normality.
  • Peter Boehm, Not the right time for contractionary measures – unemployment 6%+, GDP forecast to be below long-term average, mixed consumer and business confidence and inflation within the RBA’s comfort zone. Interest rates may rise in the second half of next year once we get a clear line of sight on the economy and if inflation starts heading north.
  • Jonathan Chancellor, Property Observer: The RBA has a definite wait and see policy.
  • Noel Whittaker, QUT Business School: No reason to move.
  • Angus Raine, Raine & Horne: The RBA will want to digest higher Australian unemployment figures, and consider what is going on globally, with the Japanese and European economies still looking soft. However, on a domestic level the China-Australia Free Trade Agreement (ChAFTA) will provide a boost for rural markets, while falling fuel prices should also mean Aussies have more money to spend in places other than the fuel pump.
  • Nathan McMullen, RAMS: Inflation remains well within the RBA's prescribed range.
  • Angelo Malizis, RESI: No economic reason to move at this stage.
  • David Scutt, Scutt Partners: The Australian Dollar remains overvalued, labour market conditions are soft, key commodity export prices have continued to decline and the economy is expected to grow below trend until at least 2016. They should be easing now but won't, at least in December. With house price appreciation slowing and targeted macroprudential tools still a strong possibility, if current domestic and international economic conditions remain subdued, the RBA will have little to prevent them easing early in the New Year.
  • Janu Chan, St. George Bank: The RBA's ongoing signal of stability in interest rates. While the performance of the domestic economy remains patchy, interest rates settings are already low enough to do what they can to support growth.
  • Gavin Smith, State Custodians: Comments from RBA Governor, Glenn Stevens indicated that the cash rate would remain at current levels for an extended period of time.
  • Scott Haslem, UBS: With GDP only a little below trend, and recent data improving, there is little reason to cut, despite a subdued jobs market. Nor is data strong enough to hike, while inflation has been easing.
  • Nicki Hutley, Urbis: Economy still has spare capacity and inflation outlook remains positive for the near-term. The economy is currently in a relatively sweet spot, but more investment needs to occur to shift growth to a more robust level as mining investment diminishes. Current 'very low' rates supports this.
  • Bill Evans, Westpac: N/A

Please note: the above respondents are ordered alphabetically by name of organisation.
Disclaimer: the comments, forecasts, projections and other predictive statements by the panel of experts are assumptions based on currently available information. These forecasts are based on industry trends and economic factors that involve risks, variables and uncertainties. No guarantee is presented or implied as to the accuracy of these forecasts and consumers are advised to read product disclosure statements and understand if financial products are right for them before signing up.


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