Property values to rise in 2020 as cash rate stalls

With property values in Sydney and Melbourne rising for the second time in many months, experts are anticipating the property market is heading up over the next year – but is this just a “dead-cat bounce”?

Experts and economists forecast property prices across the nation are set to rise by August 2020, according to a survey on the RBA cash rate. The cash rate was announced yesterday (6 August) to remain on hold at 1%.

A falling cat
In a statement, Finder insights manager Graham Cooke said it’s too early to tell if the prediction is “an emerging recovery in the housing market”.

“In finance, the saying is that even a dead cat will bounce if it drops from great heights,” he said.  

“Most economists surveyed foresee small levels of growth across the board, but a few tipped prices to tumble, especially in Sydney and Melbourne where one expert predicted a 7% drop.

“Whether you see this as a falling feline or the beginning of a true rebound, it’s clear that the full effects of the RBA’s recent cuts have yet to play out.”

However, Cooke added, after Sydney had a 71% weekend clearance rate, one of the strongest in recent months, there’s “definitely a detectable pulse.”

In terms of predicted average growth among capital cities, Canberra emerges on top with 2.27%, followed by Hobart with 2.19% and Brisbane with 1.81%.

Cooke advised those looking to get on the property ladder to “get their ducks in a row.” “Prospective first-time buyers should look at arranging pre-approval for finance soon if they want to take advantage of low rates before prices increase,” he said.

The cash rate is at a historic low with the RBA holding it down at 1.00% for the first time in three months and will likely get two more cuts by year’s end. Out of all the experts surveyed, 96% predicted the hold.

Rates remain low
ANZ, Commonwealth Bank and Westpac recently slashed their fixed-rate home loans by about 96 basis points, almost double the size of RBA’s two latest cash rate cuts.

According to Mortgage Choice Jacqueline Dearle the fixed rate drops suggest that the long-term outlook of lenders is that “rates will remain low, but demand is yet to pick up.”

She added that based on their data, demand for fixed-rate home loans is lowest in eight years at 13.5%, and demand for variable loans saw a significant spike in demand at the end of July. 

For Cooke, people who are not considering a fixed-rate loan “might be missing a trick” as the market has many very low fixed-rate offerings of late, some as low as 2.79%   

"Fixed rates may be well worth considering – as we’ve never seen rates this low – but the best path may be a split loan," he said.

“Think of this as the best of both worlds: if rates drop you get some of the benefits and if they increase you only get part of the pain. Even if you’ve been on a variable loan for five years, it’s not too early to refinance with rates at a record low."