More than half of experts say lockdowns will slow property price growth

Strict lockdowns are one of the few things that can slow down Australia’s recent surging property price growth, according to experts.

While all Finder experts correctly predicted a cash rate hold, 54 per cent of the experts who weighed in believed that the lockdowns will slow property price growth across the country.

In this month’s Finder RBA Cash Rate Survey, 40 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

According to ABS data, the first five months of 2021 saw $97 billion borrowed to fund housing purchases.

This is more than a 50 per cent rise over the previous record over the same period of $62 billion in 2018.

Finder’s head of consumer research Graham Cooke said stay-at-home orders could slow house price growth down.

“With people in Sydney still unable to leave their homes, look for house price growth slowing down in the coming weeks,” Mr Cooke said.

“This will come as good news to first-time buyers, who have seen the entry point of the market accelerating away from them in the last few months.”

Will the lockdown length could have an impact on house prices?

REA Group executive manager Cameron Kusher said he expects the lockdowns to create an acceleration on the previous growth once they end.

ANU professor Dr Jonathan Hewson and Bendigo Bank head of economic research David Robertson both tipped regional house prices to rise as more Aussies move away from capital cities.

Metropole Property Strategists founder Michael Yardney said he believed the property market will go into “hibernation for a while and then come out stronger than ever”.

Majority of experts call for a change in stamp duty

The majority of the experts (71 per cent) agreed that changes need to be made to either stamp duty or government stimulus in order to help buyers enter the property market.

Just over half (54 per cent) thought that only stamp duty should be changed. Another third (29 per cent) thought neither should be changed.

Mr Cooke said an easing of stamp duty could reduce the burden for first time buyers and establish a more even playing field.

“Stamp duty is essentially a tax that slows down the turnover of property. It discourages current homeowners from downsizing, which locks up some of the market,” he said.

“A long-term land tax would provide a fairer long-term solution, while adding liquidity to the housing market.”

Cash rate expectations

All panellists correctly predicted the rate hold for this month, and 75 per cent don’t expect to see a rate increase until 2023.

Griffith University’s Tony Makin was the only expert who predicted the rate to rise before 2022.

“In coming months a clearer picture will emerge of underlying inflation trends both in the US and in Australia,” Mr Makin said.

“The recent US inflation spike is unlikely to be temporary given the massive money supply increase, recovery from the pandemic, and substantial US fiscal expansion.

“Meanwhile, bond yields will sooner rather than later increase as governments keep borrowing at historically high levels to roll over past debt and to fund huge ongoing budget deficits.”

RBA cash rate hold

As predicted, it was announced on Tuesday that the RBA will keep the nation’s official cash rate on hold at 0.10 per cent and maintain the target of 10 basis points for the April 2024 Australian Government bond.

The RBA will continue to purchase government securities at the rate of $5 billion a week until early September and then $4 billion a week until at least mid November, it was decided at the bank’s August monetary policy meeting.

Reacting to the RBA’s decision, REA Group CEO and broker Susan Mitchell said, “The Delta-strain induced lockdowns have reinforced the need for agile fiscal and monetary responses”.

“It’s remarkable how quickly the economic outlook can change from one month to the next. That being said, the economic data released in the lead up to the lockdowns was very strong and we’ve seen the Australian economy bounce back faster than expected from previous lockdowns.

“There have been several positive economic data releases over the last month. The Australian Bureau of Statistics’ Labour Force data revealed a strong labour market nationally, with the unemployment rate decreasing to 4.9 per cent in June – the lowest rate since December 2010.”

When will the RBA will next change the cash rate?

ABC Bullion global general manager Nicholas Frappell said despite the current lockdowns, he expected lost output will be made up in the post-lockdown period.

AMP Capital head of investment strategy Shane Oliver said the RBA still had a long way to go until it would be able to meet its conditions for a rate hike.

“Inflation [must be] sustainably back in the 2-3 per cent target range which will require full employment and wages growth sustainably above 3 per cent,” he said.

“The latest coronavirus outbreaks and lockdowns risk delaying progress towards its goals.”

Bendigo Bank head of economic and market research David Robertson believed Greater Sydney’s lockdowns appear to have pushed the economy further into contraction this quarter.

“The RBA will likely respond to this by adding to QE stimulus, reversing their recent decision to taper stimulus measures,” he said.

“Assuming the lockdowns are effective by September, the economy should then rebound in spring, especially if government support measures are increased, in line with the severity of the necessary restrictions, to protect jobs.”

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