It’s not dissimilar to the countdown to Christmas, and will end with either glee or disappointment over the outcome on the day. I’m referring to the Reserve Bank board’s next meeting on February 17-18 and whether it’ll act as many now predict, in favour of a cut.
Economists from the big four banks are all flagging a cut of 25 basis points, following on from the latest underlying inflation figures falling from 3.6 per cent to 3.2 per cent in the December quarter. Should those economists be on the money, the rate will drop from its current level of 4.35 per cent (which it’s been at for more than a year) to 4.1 per cent.
These same economists from the big four banks are also predicting anywhere between two to five cuts in 2025, so there’s little certainty in the exact number of drops but it’s an injection of confidence for buyers regardless and another shot in the arm of a Brisbane market already on fire.
Ray White Group chief economist Nerida Conisbee said growing expectations of an interest rate cut have boosted market sentiment.
“Once interest rates do decrease, we could see a rapid shift from the buyer’s market experienced in late 2024 to conditions favoring sellers,” she said.
Ms Conisbee goes on to point out that the long-term outlook suggests continued price growth, with occasional brief periods of decline.
“This trajectory is primarily driven by a persistent structural undersupply in the Australian housing market,” she said.
“We appear to be experiencing a fundamental shift in the property market’s dynamics, where traditional cycles of significant ups and downs are being replaced by sustained long-term price growth, interrupted only by brief corrections.”
I expect a rate cut, should we see one occur this month, will deliver a surge in confident buyer activity driven by an ease in borrowing costs. I also don’t believe we will feel the full impact until multiple reductions are made. Even then, factors including housing supply, limited construction and cost of living will continue to come into play.
I hope you enjoyed the read.
Matt Lancashire
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