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Feb 4, 2022

NAB predicts housing price growth will slow to just 3% this year

Author: Megan Neil – 4 Feb 2022 Source: NAB Predicts Housing Price Growth Will Slow to Just 3% This Year (realestate.com.au) Australian housing prices could rise by as little as 3% this year before falling in 2023, one of the major banks predicts. National Australia Bank economists on Friday revised down their dwelling price forecasts, predicting the turning point in property prices will occur in the second half of this year. They now expect dwelling prices will rise around 3% in 2022 before declining by around 10% in 2023, which NAB chief economist Alan Oster said would be a relatively orderly decline after a very sharp run up in prices over the last year. "We have brought forward the timing of the correction we expect in house prices to late 2022 as affordability constraints begin to bite and rising mortgage rates place downward pressure on prices," Mr Oster said. "This would offset gains seen in early 2022, so that overall, prices end the year roughly flat," Mr Oster said. "We see this trend continuing through 2023, ending the year around 10% lower." Mr Oster said NAB expected this pattern to be evident across the capital cities, although larger declines would occur in Sydney and Melbourne while Brisbane and Adelaide would see less significant falls. NAB economists now expect the first rate hike from the Reserve Bank of Australia will occur in November, with Mr Oster saying there would be a steady series of hikes coming through 2023 and 2024. The latest NAB Residential Property Survey report, released on Friday, forecast capital city average dwelling prices to rise by 2.7% in 2022, down from its October prediction of 4.9%.

Feb 3, 2022

Interest rates are going up, but not as soon as many are expecting

Author: Paul Ryan - 3 Feb 2022 Source: Interest rates are going up, but not as soon as many are expecting (realestate.com.au) As the economy continues to outperform, many rate watchers are tipping an interest rate hike in the coming months. Here's why the RBA is in no rush. This week was a big one for RBA policy. At its monthly board meeting on Tuesday the RBA ended its program of bond buying, also known as ‘quantitative easing’ designed to keep down longer-term interest rates. On Wednesday, governor Philip Lowe outlined the RBA's updated economic forecasts, released in full on Friday. The better-than-expected performance of the Australian economy, and higher inflation has led many to expect interest rate increases as early as the middle of this year. Even the RBA's upgraded forecasts show inflation exceeding their 2-3% target range this year. However, the RBA has clearly laid out the case for waiting. The outlook for the economy remains very uncertain. Inflation has been boosted by supply disruptions and increased demand for goods as people's spending underwent the biggest change since rationing during the Second World War. This is good policy from the Central Bank and means the first interest rate rise may not be until 2023. The RBA is waiting for inflation to be sustainably within their target range, once these supply and demand disruptions recede. They are also waiting for wages growth that is consistent with their inflation target, which has been lacking so far. While other countries are already moving to increase interest rates, Lowe outlined that Australia has the benefit of time. Australian inflation in underlying terms is only now in the middle of the target band, well below outcomes in other economies. This is a good approach, but it stands in stark contrast with outcomes pre-pandemic.