RBA Survey: To buy or not to buy, that is the question
- Fewer than 1 in 5 (17%) experts feel positive about housing affordability, down from 54% in April
- 59% of Aussies believe now is a good time to buy property, up from 54% in May
- Today marks just the third hold of cash rate since June; 64% of experts predict cut in February 2020
5 November, 2019, Sydney, Australia –An increasing number of Australian consumers think now is a good time to buy property, but experts aren't so sure, according to Finder, Australia's most visited comparison site.
In the latest Finder RBA Cash Rate Survey™, experts and economists weighed in on future cash rate moves and economic indicators, including housing affordability.
After a peak in April 2019 when 59% of experts reported positive sentiment about housing affordability in Australia, that number has dropped by nearly 3.5 times to 17% in November.
Cooke said consumers are likely responding to the positive news they are seeing about house prices in Australia.
"Buying property is still considered 'safe as houses' in Australia, but it's taken with a grain of salt in many countries since the global financial crisis.
"House prices don't always rise and the economy doesn't always perform well.
"We're seeing house prices now increasing fairly consistently, while other economic factors have not really improved.
"This shows that the surge in prices is likely due to cheaper borrowing from three RBA cuts of 2019, rather than an indication of an improving economy," Cooke said.
So is it a good time to buy or not?
"Nobody knows what's around the corner, but the chances that this price boost is a dead-cat-bounce seems less and less likely as prices continue to recover," Cooke said.
"First time buyers with a deposit saved may miss the good-value window if they don't get into the market soon.
"If we keep seeing prices increase as dramatically as they're doing now, the market will have fully recovered within a year," he said.
Cooke said the key for anyone looking to save a deposit is to maximise their savings.
"You'll find better ongoing rates with smaller banks such as UBank and ING and neobanks such as 86 400 and Up than you will with the bigger banks. A little bit of homework can go a long way to boosting your deposit," he said.
Cash rate holds
The Reserve Bank of Australia (RBA) today announced a hold on the cash rate at 0.75%, an outcome accurately predicted by all experts (100%, 38/38) in the Finder RBA Cash Rate Survey.
While all experts predicted the hold, nearly two-thirds (64%, 21/33) expect the cash rate to drop to 0.50% in February 2020, with one-fifth (21%, 7/33) expecting a cut as soon as next month's meeting.
Here's what our experts had to say:
Nicholas Frappell, ABC Bullion: "The Reserve Bank may want to see how recent aggressive cuts feed through to the real economy (or not...) and recent cuts have tended to instill pessimism rather than boost consumer sentiment."
Shane Oliver, AMP Capital: "While September quarter inflation was low and economic data has generally remained soft, recent RBA commentary highlighting a gentle upturn in growth and greater tolerance for low inflation suggests a lack of urgency to ease for now."
Alison Booth, ANU: "Interest rates have just been lowered and I don't think the fundamentals yet warrant any further change."
John Hewson, ANU: "Unsure of economic conditions saving firepower."
David Robertson, Bendigo and Adelaide Bank: "A very low inflation read next week may change this, however for now the RBA can watch the data evolve (especially jobs). They have noted the diminishing effectiveness of monetary policy as rates get closer to zero."
Marcel Thieliant, Capital Economics: "We expect inflation to fall further below the RBA's target in Q3. But the decline in the unemployment rate in September and more upbeat comments by Governor Lowe suggest the Bank isn't in a rush to ease policy further."
Craig Emerson, Craig Emerson Economics Pty Ltd: "The cash rate is getting very close to ground zero."
Tim Moore, Credit Union Australia: "Most recent labour report and CPI print in line with expectations have taken the urgency out of further easing in the near term, giving the RBA time to assess the impact of the three recent cuts before providing a last round of easing in early 2020."
Malcolm Wood, EL&C Baillieu: "Guidance from the Governor that we should not assume more cuts, and that the economy is gradually improving."
John Rolfe, Elders Home Loans: "Almost run out of puff. Need to consider quantitative easing."
Mark Brimble, Griffith Uni: "The RBA is likely to want to see the impact of recent cuts. Markets have calmed also."
Tim Nelson, Griffith University: "Following recent easing, the RBA is likely to need time to assess the impacts before acting further."
Tony Makin, Griffith University: "Time still needed for previous cut to work through the economy. There's a risk cutting too soon could be counterproductive for consumer and business confidence."
Peter Haller, Heritage Bank: "Encouraging employment data had reduced the need for the RBA to deploy further easing in the near term."
Alex Joiner, IFM Investors: "A stabilisation of the labour market gives the RBA some time to assess the impact of its policy easing to date."
Peter Boehm, KVB Kunlun: "The Reserve Bank is trying to fire up economic activity by shooting interest rate cuts into the economy, but it seems it is firing blanks, because the latest rounds of cuts may be doing little to encourage economic growth. In fact, the cuts are likely doing more harm than good. For instance, house prices have been increasing (making it harder for first time buyers to get into the market), existing mortgage holders are maintaining repayments at current levels to help reduce their debt quicker, and therefore not spending this "freed up" cash, there's been little or no impact on the unemployment rate, corporate investment has not rebounded, business confidence is low, and the continuing reduction, and signalling of future rate reductions is sending negative messages to consumers about their economic outlook, which is doing nothing for consumer confidence, and has resulted in somewhat subdued retail sales. And then of course, pensioners and retirees who rely on savings income are being hit particularly hard by low, or even negative (in real terms) interest rates. So if the Reserve Bank is shooting blanks, what's the point of shooting more blanks into the economy? The reality is the private sector alone is not going to revive the economy. The government has to start spending. And until that happens, the Reserve Bank should hold rates where they are, until a movement either way, has a reasonable chance of having some positive economic impacts."
Leanne Pilkington, Laing+Simmons: "It was both interesting and comforting to hear the RBA governor effectively rule out the possibility of negative interest rates in Australia. Key economic indicators remain subdued and the three cuts this year have not yet had a widespread impact, though cheaper finance has certainly helped fuel demand in the real estate market. We think the RBA will hold for now and leave the door ajar for potentially another cut next year."
Nicholas John Gruen, Lateral Economics: "Because they'd like it to go lower, but my guess is that they'll play it cute and give it another month."
Mathew Tiller, LJ Hooker: "The RBA will hold rates steady in order to assess the impact of the last two cuts. The early signs for the economy, as a whole, have not been overwhelmingly positive with the biggest positive impact, of the rate cuts, been felt by property markets across the country. Property prices are now slowly increasing, auction clearance rates are back above 75% and LJ Hooker agents are reporting a major uplift in attendance at open homes."
Geoffrey Harold Kingston, Macquarie Business School: "While the Bank remains on a slight easing bias, the September job numbers were decent. This will probably stay its hand."
Jeffrey Sheen, Macquarie University: "Though the RBA has prepared the public for lower rates and possible unconventional monetary policy, I think they will (and should) hold their fire for the time being."
Stephen Koukoulas, Market Economics: "There is some stimulus in the economy and it appears to be recovering from the low point at the middle of 2019."
Michael Yardney, Metropole Property Strategists: "The RBA will wait and see how the effects of its recent three interest rate cuts pan out."
Mark Crosby, Monash University: "RBA will most likely wait to assess global conditions and local response to recent cuts."
Katrina Pai, Moody's Analytics: "The RBA has already cut rates by 75 basis points so will wait for the stimulus to filter through."
Susan Mitchell, Mortgage Choice: "The latest economic data is enough to put the breaks on the RBA's cutting spree for now. September labour force figures would have been welcome news to RBA Board members. ABS data revealed that the unemployment rate declined in September and even though it is far off the Bank's target, the latest figures provide some breathing room for policy makers. That being said, the Consumer Price Index undershot the RBA's target range, growing 0.5% over the September quarter, lifting the annual rate to 1.7%, which builds the case for further monetary policy stimulus in the short term."
Dr Andrew Wilson, My Housing Market: "RBA likely to take wait-and-see approach following three cuts in five months with concerns weaker sentiment may be offsetting stimulatory effect encouraging saving not spending. Latest CPI data neutral for another short-term cut and jobless rate lower a positive. RBA indicates easing to continue – but now early 2020."
Alan Oster, NAB: "Still looking to see what impact recent policy changes have had on the economy."
Jonathan Chancellor, Property Observer: "The bank is watching the impact of its past three cuts."
Matthew Peter, QIC: "With the labour market holding up and a stabilisation in global market sentiment around the prospects of recession and a rebound in the Australian housing market, the RBA can afford to take a breather in their current easing cycle."
Noel Whittaker, QUT: "The reserve bank governor has given hints [of a hold]."
Nerida Conisbee, REA Group: "We have now had three cuts in quick succession. At this stage, it is likely the RBA will take a wait and see approach. With monetary policy not as effective as it has been historically, we should expect to see a greater focus by Government on other ways to boost economic growth, including tax cuts and Government spending."
Christine Williams, Smarter Property Investing: "I believe the RBA will sit for a couple of months to see what effect the last reduction has had on the economy. I feel the next reduction will be February 2020."
Nelson Aston, St George Bank: "The fall in unemployment in September points to an increased likelihood of the RBA standing pat in November."
Besa Deda, St.George Bank: "We think the RBA will next cut in February 2020 with some risk they will move sooner (in December 2019)."
Mala Raghavan, University of Tasmania: "The RBA just brought down the cash rate in October and thus I think they will not immediately bring down the interest rate in November."
Other participants: Bill Evans, Westpac. Clement Tisdell, UQ-School of Economics.
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