Dr Peng Wong
Topics: RBA, interest rates, cash rate, home ownership, housing market
“The Reserve Bank of Australia (RBA) has executed 11 consecutive rate hikes since 2 May 2023.
“Although inflation seems to have peaked, albeit at a still stubbornly high 7%, the RBA has reiterated its commitment to bringing inflation within 2 to 3%.
“NAB are predicting the RBA will lift the cash rate three more times within the six months after March 2023. Along with Westpac and ANZ, they have also forecast interest rate cuts but not until 2024 and 2025.
“If the major banks’ predictions are correct, it is reasonable to expect the mortgage interest rate will stay high – and even potentially continue to rise – in 2023 and into 2024.
Australians are struggling under the rising cost of living. A home loan mortgage rate is now approximately 5.60 per cent after 11 cash rate hikes, meaning the monthly payment on a 25-year $600,000 NAB base variable mortgage will have climbed approximately $1,500 a month. Meanwhile, the borrowing power of homebuyers is reduced.
“These factors are negatively impacting the housing market.
These issues give rise to further emerging housing supply issues.
“As the housing market dips, a significant number of would-be sellers have (and are likely continue to) withdraw from the market, resulting in fewer properties on the market. Approximately 1,730 properties were put under the hammer across the nation's capitals in the last week of April, which was significantly lower than the 2,699 in the same weekend last year according to an ABC report.
“The building sector is also experiencing high levels of upheaval and hardship. Australian Securities and Investments Commission data reveals 1,236 companies in the construction sector that have gone into liquidation, receivership or administration in March 2023, further impacting homebuilders and housing supply.
“All these factors have impacted negatively on the supply of housing, which is strongly tied to our emotional state and day-to-day life choices. Housing also represents the largest wealth component for Australians – even higher than our superannuation. It is important that the Government takes action to alleviate pressure on mortgage owners, renters, homebuyers and the building industry at this time.”
Dr Peng Yew is a lecturer in the School of Property, Construction and Project Management of the RMIT University, Australia. His research has explored the determinants of overseas investments in the Australian residential property market after the Global Financial Crisis 2008.
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