While the ANZ has said there would now be a prolonged pause in interest rate increases by the Reserve Bank, Westpac said today it could be September 2024 before mortgage holders saw the first cut in rates.
“The RBA is now confident that the latest data points to it achieving its inflation target by 2025,” Westpac’s Bill Evans said.
“They (the RBA) still believe inflation will reach 3.75 per cent by end of 2024. They have extended their forecast from June 25 to Dec 25 and they expect inflation will back within the 2 to 3 per cent band (by December 2025).
“But they have not been confident enough to say they will be back in the middle of the band (2.5 per cent).”
Evans said Westpac had been forecasting the first interest rate cut would be in June next year but it had been pushed back because the cash rate was going to be lower than expected.
“Once we start to see the rate cuts coming through we do expect them to be very rapid, about one rate cut every quarter for at least 12 months and getting the cash rate back in the low 3s, which is slightly below the neutral level and you need to get below neutral if your economy is growing well below its trend.
“And that’s why we would expect that once the easing cycle begins it will extend well into 2025.”
Digital platform Pexa said there was a reason to be optimistic about the year ahead because real estate settlement volumes had picked up since March across the mainland states and June volumes were at levels comparable to the boom in the previous year.
“This suggests the market has already bottomed out and is beginning to recover as we enter 2024,” Pexa’s head of research Mike Gill said.
“Despite higher interest rates and other headwinds, we are still seeing strong demand for housing in Australia with settlement volumes starting to bounce back.
“There are a number of factors that will continue driving the property market this year, including increased net migration, the trend toward smaller households, low volumes of new listings as sellers wait for the market to improve, and a very tight rental market.”
PEXA’s research found $603 billion was spent on property in Australia in 2023, greater than the amount spent in 2021 and 2020 ($546.2 billion and $408.8 billion respectively), which reflected the increase in average selling prices over that period.