Chris Joye believes that the conditions are ripe for a housing recovery, and projects that prices will lift at least 5% to 10% after the RBA’s second interest rate cut. From The AFR:
If the Reserve Bank of Australia cuts its cash rate twice – with the first likely at its June meeting – I expect national house prices will climb at least 5 to 10 per cent over the 12 months following the final move…
On Wednesday the RBA was privately telling bankers that they should pass through 100 per cent of its June cut, and potentially more, given the sharp compression in funding costs…
Our analysis indicates that APRA’s change will enhance this person’s borrowing capacity by 14 per cent, with the impact growing as home loan rates fall. If the RBA cuts twice and the cheapest home loan rates fall from, say, 3.5 per cent to 3.0 per cent, our analysis suggests that borrowing capacity will lift by 20 per cent.
There’s no doubt that the National Property Protection Racket (NPPR) is in full swing. Negative gearing and CGT reform is dead, first home buyer stimulus and rate cuts are coming, and APRA is easing its macro-prudential controls via its reduction in the interest rate buffer. We also expect more policy easing to come.
If you are looking to buy a house to live in, get cracking. Because prices will likely bottom in the second half. While we don’t expect to then see wild growth reminiscent of the last few cycles, the ingredients are in place for a modest recovery. That is, until the next global economic crisis hits (whenever that is), by which time Australia will be running very low on monetary and fiscal ammunition.
