Australian renters can expect to be hit with dramatic price rises as the nation’s borders reopen, according to experts.
In this month’s Finder RBA Cash Rate Survey, 37 experts and economists weighed in on future cash rate moves and other issues relating to the economy, with 73 per cent predicting rental prices will rise sharply as Australia opens its international borders.
Graham Cooke, head of consumer research at Finder, said renters should start preparing for higher housing costs.
“The pandemic turned the rental market on its head in some areas, with vacancy rates increasing in major capital cities like Sydney and Melbourne,” Mr Cooke said.
“As international students and backpackers return to our shores, we’re going to see demand quickly flow back.”
Experts split on rate rise next year
While there is no expectation the cash rate will increase before the year ends, almost half of all experts expect a rate increase in 2022, according to the survey.
Mr Cooke said there had been a seismic shift in expectations for a rise in 2022.
“Only a few months ago, there was little expectation of any movement until 2023. Now half of the experts are predicting a rise next year.”
Nicholas Frappell of ABC Bullion said despite multiple risks through 2022, he was still leaning towards an earlier than expected tightening.
David Robertson of Bendigo Bank said with economic recovery underway, together with rising inflation, he expected to see pressure on the RBA to increase official interest rates by next December.
“The economic recovery underway, together with rising inflation, will see pressure on the RBA to increase official interest rates by next December, although there is uncertainty around the new Omicron variant,” Mr Robertson said.
“Assuming vaccines and boosters are effective for Omicron, the recovery should continue and higher rates should be expected through Financial Year 22/23.”
Laing+Simmons’ Leanne Pilkington said interest rate noise was getting louder but the RBA had been clear in its communication.
“(The Reserve Bank has indicated) rates won’t go up unless economic and inflationary pressures take an unexpected turn,” Ms Pilkington said.
“The consistency of this position is appropriate,”
More than two-thirds of experts (71 per cent) expect to see lenders raise their interest rates out of cycle before the RBA increases the cash rate.
“Those who think their rate will stay low just because the cash rate is holding would be wise to be prepared for an out-of-cycle hike,” Mr Cooke said.
Housing market unlikely to deflate in 2022, but employment and wage growth look strong
Finder’s Economic Sentiment Tracker gauges experts’ confidence in five key indicators: housing affordability, employment, wage growth, cost of living and household debt over the next six months.
Both housing affordability and cost of living have seen month-on-month-declines.
Mr Cooke said while there had been some forecasts of price drops in 2022, Finder’s panel was largely in disagreement.
“Over 80 per cent of experts think it is unlikely that property prices will fall by 5 per cent or more next year, as has been suggested in some quarters. Expect a robust but unspectacular 2022,” he said.
“Not only will property values continue to rise, albeit perhaps more slowly, rental prices are also set to jump significantly.”