Finder’s RBA Survey: Experts say 1.2 million homes won’t be built by 2029 as cash rate holds

Homeowners have reason to be cautiously optimistic that a cash rate cut may come sooner than later.

In this month's Finder RBA Cash Rate Survey™, 27 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.

All experts correctly predicted a cash rate hold – keeping it at 4.35% in February.

Graham Cooke, head of consumer research at Finder, said the decision will be met with relief.

"Households have been struggling immensely according to our data, so this rate hold will come as welcome news.

"We're now starting to see a few banks ease rates on some of their fixed rate home loans in anticipation of rate cuts to come – the attitude has certainly shifted.

"If your rate doesn't start with a 5, it may be time to consider your refinancing options."

Average Aussie mortgage repayments

Experts say we will miss government's new build target

The majority of panellists (89%, 17/19) believe we won't achieve the Australian government's target to build 1.2 million homes over the next 5 years.

This comes after recent data showing approvals for detached houses were 6.2% lower in November compared to 2022.

When asked what non-supply-related policy the government could implement to bring down house prices, Tom Devitt from Housing Industry Association said, "[This can not be done] without risking serious other negative consequences that outweigh the benefits."

Rich Harvey from Propertybuyer suggested the government apply annual land tax instead of upfront stamp duty.

"Make it easier for people to move house instead of paying massive stamp duty which dampens [the] incentive to move fluidly. Increase density zonings in areas [where] critical infrastructure is in place or has scope to be installed," Harvey said.

Cooke agreed, but said there's no quick fix on the horizon.

"Stamp duty is an obstacle to full property market fluidity. It's a large tax burden both for older Aussies who want to downsize and for growing families looking for more space.

"A land tax paid over a longer period of time would make the decision to move home easier.

"Having said that, changes will need to be gradual to protect valuable tax income, and ensure continued government funding."

Rental costs expected to rise by as much as 9.4%

The panel expects rental prices to increase throughout Australia by the end of 2024.

The most notable increase is predicted for Perth, where experts forecast rental costs will rise by an average of 9.4% by the end of the year. This is similar to predictions made in December of an average increase of 9.5%.

Finder analysis reveals the average minimum household income required to afford a house in Perth will be almost $110K, or just over $98K for a unit.

In December 2023, experts predicted rental costs to increase by an average of just 6.5% in Brisbane – this has since jumped to 8.1%.

This means the average minimum income required to afford a house will be almost $109K, or $97K for a unit.

All other capital cities' forecasts slightly dipped.

In Melbourne experts anticipated rents would spike by an average of 6.8% in December – this has now fallen to 4.4%.

Hobart is expected to have the smallest increase in costs at an average of 1.7% – slightly less than the 3% forecast in December – which would see Australians needing almost $97K for a house, or $82K for a unit.

Forecasted rental price increase by end of 2024 + minimum house income required

Cooke said the relaxed forecasts will be welcome news as rising costs have made it increasingly difficult for renters to secure a place to live.

"Tenants on low incomes will bear the brunt of rising rental costs, as they struggle to keep up with escalating prices.

"Many don't have the extra funds to spare, and are already in over their heads to keep food on the table," Cooke said.

Mark Crosby from Monash University said he expected a significant shortage of housing to persist in 2024.

"Despite rate and mortgage pressure, the demand for housing will remain stronger than supply," Crosby said.

*Experts are not required to answer every question in the survey

Here's what our experts had to say:

Tomasz Wozniak, University of Melbourne (Hold): "Happy New Year! My short-term forecasts are clearly centred about the current cash rate value. My reading of these results is that the RBA will HOLD the cash rate at the current value to push the inflation down more. I expect the first interest rate cuts by mid-2024. My forecasts are available at https://forecasting-cash-rate.github.io/".

Shane Oliver, AMP (Hold): "Inflation is falling faster than the RBA expects and since the last meeting consumer spending and employment data has been weak."

Anthony Waldron, Mortgage Choice (Hold): "The latest inflation data released by the Australian Bureau of Statistics showed that the CPI rose to 4.1% in the 12 months to December. This is the smallest quarterly rise since the March 2021 quarter and should give the RBA reason to keep the cash rate on hold when it meets for its first monetary policy meeting of 2024."

Stella Huangfu, University of Sydney (Hold): "It is clear from the CPI data released today that inflation is easing in Australia. The RBA will keep the interest rate on hold for the next 2 meetings."

Sean Langcake, Oxford Economics Australia (Hold): "The Q4 data showed CPI disinflation is running ahead of the RBA's forecast, which should ensure inflation will return to target in a timeframe they deem tolerable. Inflation pressures are still relatively broad, and non tradable inflation is uncomfortably high. But we expect the RBA will be on the sidelines until the first cut in late 2024."

Cameron Kusher, REA Group (Hold): "Inflation has come in well below the RBA's forecast, retail sales have slowed and the unemployment rate has lifted and job creation has stalled. There seems to be no hard evidence to point to that suggests the RBA will lift rates."

Adj Prof Noel Whittaker, QUT (Hold): "There is evidence that rising interest rates are starting to bite and inflation is dropping. There is no reason to increase interest rates right now."

Harry Murphy Cruise, Moody's Analytics (Hold): "Australia's fight against inflation is coming along in leaps and bounds, giving the RBA some breathing room before they cut rates later in the year. But progress will slow through 2024, as looming tax cuts will hand cash back to households at the exact same time the RBA is trying to take money out of the economy. That will delay Australia's first rate cut until September."

Tom Devitt, Housing Industry Association (Hold): "The RBA will want to be very sure that inflation is safely within its target range. The last CPI data was very good but August 2024 will give them two more CPI readings, as well as more labour market, wage and retail data to really be confident as to the impact of their hiking cycle."

Nalini Prasad, UNSW Sydney (Hold): "Inflation has been easing. I think the RBA will hold interest rates constant for the time being to see what happens to inflation."

Evgenia Dechter, UNSW (Hold): "Inflation is declining, economic indicators show a slowdown in growth, and unemployment is picking up. The RBA is likely to proceed with caution and wait for more supporting statistics before it will start cutting the cash rate."

David Robertson, Bendigo Bank (Hold): "The RBA will hold rates at 4.35% in February but retain its tightening bias – however the next move will most likely be a cut around year end. Earlier cuts are possible if services inflation improves, but that will take time."

Craig Emerson, Emerson Economics Pty Ltd (Hold): "Retail sales have slumped and so has the CPI. There is no logical reason for the RBA to increase the cash rate."

Tim Nelson, Griffith University (Hold): "Inflation still running higher than target."

A/Prof Mark Melatos, University of Sydney (Hold): "Inflation remains above the RBA's target band despite moderating in recent months. House prices appear to have significantly decoupled from incomes and shrugged off the rate increases to date. As long as low unemployment (effectively full employment) persists, the cash rate is unlikely to be reduced and further increases remain a possibility."

Saul Eslake, Corinna Economic Advisory Pty Ltd (Hold): "The Dec quarter figures were good enough to rule out whatever little prospect there was of the RBA raising rates again – but not, in my opinion, good enough to warrant any expectation that they'll cut rates at that meeting, or indeed at any meeting this year (bearing in mind that the tax cuts due on 1 July are equivalent in terms of their impact on household cash flows to two 25 bp rate cuts, albeit that their distributional impact is very different)."

James Morley, University of Sydney (Hold): "Inflation is coming down as expected and retail sales were weak. So I think there is a zero chance of a rate increase at the February meeting. Any rate cut will likely wait until other central banks such as the Fed begin lowering cycles and inflation shows further progress back to the target range. This is unlikely to be until the fourth quarter at the earliest."

Mathew Tiller, LJ Hooker Group (Hold): "The latest CPI figures show that inflation is falling faster than the RBA's forecasts. This, combined with a slowly softening employment market, should signal the end of the RBA's rate-hiking cycle."

Kyle Rodda, Capital.com (Hold): "The latest CPI data shows inflation following the RBA's glide path. There's little impetus for the central bank to raise rates; it's likely the job is done."

Peter Boehm, Pathfinder Consulting (Hold): "At this stage I believe the RBA will take a wait and see approach. With so many Australian families struggling financially it would be an economic, social and political disaster if rates were increased again, notwithstanding CPI is currently above the target range. The recently announced changes to the Stage 3 tax cuts will have little impact in the short term (because they don't come into effect until July 1, assuming they pass the Senate) but it may have an impact in the second half of 2024, whereby rates may not reduce as hoped."

Dale Gillham, Wealth Within (Hold): "Whilst CPI is still above the RBA target level, it is slowly declining as such I don't think the RBA needs to place further pressure on Australian households."

Mark Crosby, Monash University (Hold): "Until inflation is at the top of the target range there is no reason to move rates currently. Don't expect any changes in 2024."

Jakob Madsen, University of Western Australia (Hold): "Still high inflation running high."

Rich Harvey, Propertybuyer (Hold): "Interest rates have peaked with inflation figures showing a meaningful decline. The RBA will be closely watching the impact of higher rates on households and small businesses to determine when they need to take their foot off the demand brake – without re-igniting inflationary concerns."

Cameron Murray, Fresh Economic Thinking (Hold): "The interest rate cycle seems to have peaked globally. Unless there is a surprise reversal in the declining rate of inflation, then I suspect the RBA and other central banks are happy to leave interest rates unchanged."

Michael Yardney, Metropole (Hold): "There is sufficient evidence that inflation is coming under control, and the RBA does not need to raise rates any further. There is a lag effect of monetary policy with interest rate changes typically taking time to fully permeate through the economy. Given this delay, the RBA should keep observing the impact of previous rate hikes before deciding on further increases. There is clear evidence that inflation is coming under control so an additional rate hike in February should be deemed unnecessary, or even counterproductive."

Stephen Koukoulas, Market Economics (Hold): "Weak growth, rising unemployment, inflation back on target."