More rate hikes on the cards: RMIT

With further rate hikes signalled by the Reserve Bank of Australia (RBA) after the latest policy decision last Tuesday, RMIT lecturer Peng Yew highlighted the ongoing pressures on the housing market and supply.

With NAB forecasting a further three hikes within the next six months and Westpac and ANZ forecasting cuts in 2024 and 2025, a combination of housing prices, supply and borrowing capacity has caused some stress on the housing market.

“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,” Yew said.

“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.”

Despite inflation peaking and resting at a high of seven per cent, the RBA has reaffirmed its intention to bring it down to the two to three per cent target.

Yew said the home loan mortgage rates are now approximately 5.60 per cent after 11 hikes, with the monthly repayment on a 25-year $600,000 NAB home loan has increased by around $1,500 a month.

“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,” he said.