00:00We certainly didn't see as much of a slowdown as we would have expected
00:05if people were expecting a rate rise in February.
00:08It was quite different to last year.
00:09In January last year, we really saw a pick-up in pricing
00:12as people started to price in the rate cut that came in in February.
00:16Around the country, it does depend on where you are
00:19as to how strong the market is.
00:20If you go somewhere like WA at the moment,
00:23it's still running at close to 20% per annum price growth.
00:27Very similar situation in south-east Queensland.
00:29Also Adelaide, very strong.
00:31Bigger cities, a little bit more mixed.
00:33Melbourne started to pick up at the end of last year.
00:36Sydney now strong.
00:37And then when we look at the affordable segment of the market,
00:40we are seeing very strong growth under those first home buyer caps
00:45that have been put in place with the 5% deposit scheme.
00:48What about when you look at things more broadly, not just the month,
00:52when you look at what the yearly trends are expected to do?
00:54Should we be bracing for some sort of cooling or slowing down?
00:58Yeah, absolutely.
01:00I mean, we are almost certainly going to see a rate rise tomorrow,
01:03but even if we don't, we do expect the market to slow down this year,
01:07primarily because the outlook for rate cuts is very unlikely.
01:12So last year, we had those three rate cuts coming through.
01:15They did lead to an acceleration in the market.
01:17We don't expect prices to fall.
01:19And the reason being is that a lot of the pressure on housing supply
01:23is expected to continue.
01:24We aren't seeing anywhere near the 1.2 million homes over five years
01:29that is required to get to an affordable level for housing.
01:33We've still got huge problems with construction costs,
01:36and we're seeing that really clearly in the CPI numbers,
01:40that construction costs did start to moderate last year,
01:44at the start of last year, but have now re-accelerated.
01:46So it is really problematic to build at the moment.
01:49We're not seeing enough apartments in particular being built,
01:53but also a lot of challenges with detached housing as well.
01:57What do you see the impact of a rate hike tomorrow,
02:00should it eventuate,
02:01keeping in mind that 75% of the market is pricing that in?
02:05Yeah, look, we do expect it to slow,
02:08and I think, you know,
02:09the market will definitely take a bit of a pause.
02:11So it does seem to flow through quite quickly with property pricing,
02:15and primarily because the ability of people to borrow
02:20starts to become more limited.
02:22So there is a buffer when people go to get a loan of 3%
02:26above the base mortgage rate.
02:29So obviously that impacts the ability of people
02:31to borrow almost immediately.
02:34So February, we do expect to slow down
02:35if we see a rate rise tomorrow.
02:38And from there, I think a lot of people will be watching
02:41very closely, obviously, what happens with inflation and unemployment,
02:46because if we do see further rate hikes,
02:48we do expect the market to continue to slow.
02:50And we know direct rate hikes are one thing.
02:53What about how this is going to impact on consumer sentiment
02:55and people's ideas and feelings around buying homes?
03:00Yeah, look, it will be...
03:02It will negatively impact.
03:04I mean, it has been interesting that even though we have had
03:07a cost-of-living crisis,
03:08we haven't seen a huge impact on house prices last year.
03:13So it does appear to be the case that the people
03:17that are being most impacted by cost-of-living
03:20are the people buying homes or, you know,
03:22does tend to be driven mainly by people perhaps on higher incomes,
03:26people by more secure employment.
03:29We know, too, that a lot of people, first-home buyers,
03:32are really being supported by a lot of government incentives
03:35and perhaps things like the bank of mum and dad as well.
03:39So there is a lot of complexity with regards to sentiment.
03:42And, look, it was surprising when rates rose as rapidly
03:46as they did following the end of the pandemic
03:48that house prices also rose very, very rapidly.
03:50And it does really reflect the complexity of housing markets.
03:55And it's not all just about interest rates.
03:57There's also a lot of other things going on.
03:59Yeah.
03:59And finally, just before I let you go, Nerida,
04:01what are you calling on rates for the year ahead in 2026?
04:06Yeah, look, I think there'll be a rate rise tomorrow.
04:09I think from then on it is going to be hugely data dependent.
04:12I mean, we have to remember now we are getting inflation data
04:15in every single month now.
04:17There are still some quite conflicting signals.
04:20I mean, I think broadly things are going well
04:23for the Australian economy.
04:24It is very strong.
04:25Obviously, that brings inflation risk.
04:28But globally, there's also a lot of uncertainty.
04:30So I think at this point, a rate rise tomorrow
04:33and from there, we're very data dependent.
04:36Nerida Connersby, Chief Economist at Ray White,
04:39thank you very much for your time.
04:40Thanks for having me.
04:41Thanks for having me.
04:45Great.
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