Prices have peaked, but rates could still fall: finder.com.au survey
Leading experts and economists believe the Australian property market may have ‘peaked’, while the Reserve Bank decided to leave the cash rate at 1.5 percent, according to finder.com.au.
In the latest finder.com.au RBA survey, all 34 experts and economists correctly predicted the Reserve Bank would keep the cash rate at its current level of 1.5 percent this month.
When panellists were asked what they thought the Bank should do this month, three respondents (Dr Andrew Wilson of Domain Group, Stephen Koukoulas of Market Economics and Nicholas John Gruen of Lateral Economics) claimed the RBA should decrease the rate.
Interestingly, two experts and economists (Noel Whittaker of QUT and Clement Tisdell of UQ-School of Economics) said the Bank should increase the cash rate.
In terms of the next cash rate move, 78 percent of experts and economists are expecting a rise. However, the majority of this group (81 percent, 22) are not predicting the rise to come until 2018.
Graham Cooke, Insights Manager at finder.com.au says mortgage holders should protect themselves from future rate rises.
“One strategy you can employ is to split your mortgage rate. This way, you can enjoy both the flexibility of a variable rate and the stability of a fixed rate,” he says.
On the other hand, of the minority of panellists who are tipping the next move to be down, most believe the cash rate will dip no lower than 1.0 percent.
An investment bank recently said the Australian housing market has “peaked”. In response to this statement, economists were divided; 60 percent (15) agreed while 40 percent (10) disagreed.
Mr Cooke says some capital city markets may have peaked, but it’s difficult to conclude whether the national market has peaked.
"Prices in some capital city markets, such as Perth, have deflated - but the cyclical nature of markets means it’s unlikely prices in other cities will increase indefinitely at their current rate.
“However, anyone holding out for a major price adjustment may be waiting a while. The general feeling is that while recent adrenaline-fueled price growth is likely to slow, it’s not expected that prices will fall dramatically. Prices may just plateau for a given period,” he says.
Recent inflation data indicated a 0.5 percent increase in CPI in the March quarter, but panellists were divided about the positivity of this news.
Most respondents (17, 57 percent) said current inflation figures did not indicate that the economy is improving. However, thirteen experts (43 percent) thought the latest inflation figures show the economy is heading in a positive direction.