RBA rate rises hammer Aussie housing confidence

The June quarter ANZ/Property Council Survey has been released, which is based on a survey of more than 750 industry respondents, conducted between 6-22 June 2022.

The survey shows that confidence across the property sector has been hammered by the Reserve Bank’s aggressive interest rate hikes, alongside reduced access to finance and concerns over the economy.

The overall Confidence Index tanked 19 points nationally in the June quarter and is now tracking below below the long term average (124 index points):

Property sentiment dropped in the June quarter as expectations for interest rate hikes ramped up and firms worried about access to debt finance… Confidence fell across all property segments, with the largest fall in residential property sentiment.

Interest rates and finance availability the key. With the rate hike cycle now in full swing, almost everyone expects interest rates to go higher over the coming year. But it was access to finance that took a real hit. A net balance of 45% of respondents now expect finance to be more difficult to access over the next year. This is a record high. Higher even than the levels reached in 2018 when mortgage finance was squeezed in the wake of APRA tightening and the Royal Commission into the banking sector…

National economic growth expectations fell sharply in the June quarter and are now lower than at any time outside the COVID period…

Every person and their dogs are now anticipating heavy peak-to-trough falls in national dwelling values, with most estimates ranging from -10% to -20%.

How deep the correction goes will depend on how aggressively the Reserve Bank hikes interest rates. If it keeps rate hikes to around 2% (the bottom of the economists’ range), then falls of around 10% nationally are more likely. But if the RBA follows the lead of the ‘market’, and hikes the cash rate to around 3.5% by mid next year, then falls of around 20% are likely.

Ultimately, the ball is in the Reserve Bank’s court.