BresicWhitney CEO Thomas McGlynn expects buyers to return if rates come down. Here's our conversation with him ahead of the RBA announcement.
What are you predicting for May's rate decision by the RBA?
Given the recent moderation in inflation, with headline CPI at 2.4per cent and trimmed mean at 2.9 per cent - both within the RBA's target band for the first time since 2021 - we are expecting a 25-basis point cut today, to reduce the cash rate to 3.85per cent.
What are the key conditions that will bring this decision?
The RBA factors a few key conditions and indicators into its decision making, including but not limited to inflation, domestic employment growth, wage increases and global economic risks. I believe the ones that'll carry the most weight for the RBA is not only the containment of inflation but the reduction of it within the RBA's target range.
Is the Trump factor a consideration?
President Trump and his implementation of the tariffs over recent months has certainty been a talking point around the world, and there are potential impacts on the Australian economy and by extension the property market. However, with respect to today's decision, the RBA is likely to remain focused on the domestic economy and local indicators.
If interest rates go down, what is the expected impact on house prices in Australia generally?
A reduction in interest rates generally enhances borrowing capacity which stimulates demand in the housing market, and we expect to see an increase in buyer engagement if interest rates are reduced again today. If rates continue to decrease to 3.35 per cent as expected by year's end, we see this exerting upwards pressure on prices.
However, it's important to understand the wider landscape and the role that supply, government policy, and broader economic conditions play in house prices.
This is in line with the closer relationship between property, politics, and the economy that we've been observing for a number of months now.
As a side, we expect there to be an impact on the market following the implementation of Labor Government policies, the extent of which will become evident in time.
Would a cut in interest rates also affect listing numbers?
It's likely but not a guarantee. A decrease in interest rates often boosts seller confidence due to more buyers in the market and increased purchasing power.
If interest rate cuts are sustained over 2025, this is when we would expect to see a more material uplift in listing numbers due to the more broad-based confidence it would provide sellers.
How many cuts do you expect to see this year?
It's expected there'll be up to three 25 basis point cuts throughout the year to bring the cash rate down to 3.35per cent by year's end.
While we don't know for sure, we can be quite confident that reductions will remain gradual and measured.
