RBA Survey: Brisbane and Melbourne picked as top cities to buy property

• • • • Only one in eight experts and economists say they would buy in Sydney
      • Experts say First Home Buyer Scheme will have 'no significant impact'
      • Today marks 4th hold of cash rate since June; 66% of experts predict cut in February 2020

3 December, 2019, Sydney, Australia – Experts have encouraged those hunting for good value for their property dollar to look at Brisbane and Melbourne, according to Finder.

In the latest Finder RBA Cash Rate Survey™, experts and economists weighed in on future cash rate moves and economic indicators, including wage growth and housing affordability.

Almost a quarter said they'd buy in Brisbane or Melbourne (22% each) if they were to purchase property today. Third place was a tie between Canberra (13%) and Sydney (13%), while 9% say Hobart would be a good place to buy.

Perth and Adelaide were at the bottom of the list, with only 4% of experts tipping the cities to be a wise property investment.

Source: Finder RBA Cash Rate Survey

Graham Cooke, insights manager at Finder, said the biggest surprise was where Australia's largest city landed.

"While Melbourne and Brisbane are strong candidates for the most promising property market in Australia, it is a bit stunning to see Sydney perform relatively poorly.

Cooke said the results are also a good reminder for investors to look beyond their local area.

"The state you live doesn't need to be the state where you buy. With many Sydneysiders grappling with housing affordability, rentvesting could be the way to go."

Experts say First Home Buyer Scheme will have 'no significant impact'

The Federal Government finally announced the launch of one of its key election promises: a mortgage guarantee scheme for first home buyers.

The scheme will guarantee mortgages for 10,000 first home buyers who have only saved a 5% deposit, effectively helping them buy sooner without paying lenders mortgage insurance premiums.

Economists were sceptical of the scheme, with the vast majority (90%, 19 respondents) saying it would have no significant impact on the market.

Cooke said aside from the small number of borrowers who would get the aid, the property value caps are problematic, especially in Sydney.

"The Government's scheme limits the purchase price of Sydney properties to $700,000, which to be honest, is a joke.

"Not many properties will qualify for this scheme – some apartment buyers may qualify, but not many houses are available for below that price.

"With the average regional home in Australia needing to fall below a $350k window to qualify, even options for those outside cities will be limited.

"Additionally, borrowing with a 5% deposit can end up being a lot more expensive in the long run. This could cost you over $90,000 in extra interest over the full term of a home loan at the big four's standard variable rate."

The scheme will be administered through the National Housing Finance and Investment Corporation (NHFIC) in partnership with lenders and is intended to make low deposit home loans cheaper.

To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:

Property value caps

*A regional centre is defined as a city with a population above

250,000, such as Newcastle, Wollongong or Geelong.

Here's what our experts had to say:

Nicholas Frappell, ABC Bullion: (Hold) "A full assessment of the impact of recent cuts, in addition to progress on trade talks, may allow the RBA to wait until after the New Year."

Shane Oliver, AMP Capital: (Hold) "Growth is likely to remain lower for longer keeping the economy away from full employment and the inflation target for even longer than the RBA is forecasting. As a result, further easing is likely. The RBA should be cutting in December but appears inclined at this stage to continue to "wait and assess". Data to be released in the days prior to the December meeting could yet tip them over into a December easing though so it's a close call."

Alison Booth, ANU: (Hold) "Monetary policy sensitive / now rates are slow - to what fiscal policies might be introduced. And they should be."

Julie Toth, Australian Industry Group: (Hold) "Australia's economy is failing to accelerate (again) in 2019-20. Non-mining business investment remains especially weak, but it is sorely needed to boost our productivity growth and real incomes for all. In the absence of meaningful tax reform and micro-economic reform, another rate cut probably won't help much, but it is the only response that the RBA can offer."

Malcolm Wood, Baillieu: (Hold) "Dec on-hold whilst assessing impact of 75bps of cuts to-date."

David Robertson, Bendigo And Adelaide Bank: (Hold) "Expect the RBA to remain on hold until February or May 2020, when another cut to 1/2% is likely. QE may be more effective, in the absence of fiscal stimulus."

Craig Emerson, Craig Emerson Economics: (Hold) "RBA is waiting for further evidence on changes in components of GDP."

Timothy Andrew Moore, CUA: (Hold) "RBA have given a clear easing bias but also that they are willing to wait and see the outcome from previous cuts, whilst giving the consumer time to digest the changes. Not a question of if but more so timing."

Trent Wiltshire, Domain: (Hold) "The RBA's own forecasts have the unemployment rate remaining above full employment, so wage growth and inflation won't pick up without more expansionary monetary policy."

Nicholas Gruen, Lateral Economics: (Cut) "The textbook says the RBA should cut aggressively as I've been arguing for five years. They instinctively agree, but they're agonized that sustained low rates blow bubbles. So each cut is minimal and often not consecutive. I think that blows worse bubbles – sustaining low rates for longer. But given they didn't move last month, I think they'll cut."

John Rolfe, Elders Home Loans: (Hold) "Wages still not rising but with very little scope left for reductions the RBA will have to look at other levers (i.e. quantitative easing)."

Mark Brimble, Griffith Uni: (Hold) "The RBA is likely to want to hold remaining rate cuts in reserves and wait to see how marco events play out including US election and impeachment, Brexit, AUD, property market stablisation, etc."

Tim Nelson, Griffith University: (Hold) "It is not clear that a rate cut is required but should the economy continue to soften, a rate cut is more likely in early 2020."

Tony Makin, Griffith University: (Hold) "Housing prices have risen in major capitals recently and the exchange rate has been fairly steady since the last rate cut. Further cuts at this juncture would fuel property prices and may actually be counterproductive for business and household confidence."

Peter Haller, Heritage Bank: (Hold) "The RBA clearly has an easing bias but it has the time to monitor economic data until next year before easing again."

Alex Joiner, IMF Investors: (Hold) "The RBA is clearly considering further easing of policy but has expressed a desire to evaluate the impact of rate cuts to date. There hasn't been any compelling data since the November meeting that would have changed this to the Bank and therefore a further cut early next year is to be expected as the data softens."

Peter Boehm, KVB Kunlun: (Hold) "The RBA should adopt a hold position for the remainder of this calendar year. The downsides far outweigh the upsides for another rate cut at this time for the reasons I alluded to in my previous commentary. Ideally, rates won't go any lower, although they might, but this direction is unclear for now - this is why I have left open when a further rate movement may occur."

Leanne Pilkington, Laing+Simmons: (Hold) "The two rate cuts of 2019 had the desired effect from a housing market perspective, but broader economic concerns remain. The RBA is conditioning us to expect low wage growth for the foreseeable future and household debt levels are at worrying highs. It was interesting to see how close the RBA came to cutting rates last month and we still feel the next move will be downward."

Mathew Tiller, LJ Hooker: (Hold) "Given the cash rate is already at record low levels and the lacklustre economic response to the recent rate cuts, the RBA will hold steady this month and reassess conditions in the new year before cutting rates further."

Geoffrey Harold Kingston, Macquarie Business School: (Hold) "[The RBA is holding due to] weak jobs growth & a drop in breakeven inflation from 1.4 to 1.3% p.a."

Jeffrey Sheen, Macquarie University: (Hold) "I marginally expect that global economy growth will bottom out in mid-2020."

Stephen Koukoulas, Market Economics: (Hold) "The economy will be growing at a solid pace and inflation will be touching 2%."

Michael Yardney, Metropole Property Strategists: (Hold) "The latest economic news must have disappointed the RBA. The jobless rate is rising, employment is falling and wages growth is declining. This means another interest rate cut is on the cards, but the RBA is likely until next February."

Susan Mitchell, Mortgage Choice: (Hold) "The minutes of the November monetary policy meeting suggest the RBA is in no rush to cut the cash rate a fourth time in 2019 given the length of time it takes for monetary policy stimulus to absorb into the economy. The Bank is likely to wait and see whether positive signs emerge from the economy before acting again. That being said, forecasts for wage growth, inflation and the labour market suggest that the Board may resort to cutting the cash rate once again in the new year."

Alan Oster, NAB: (Hold) "The RBA are waiting to see impact of past actions."

Jonathan Chancellor, Property Observer: (Hold) "A February decision allows time for more data to enable to central bank to sense the way the prior cuts have impacted on the economy."

Matthew Peter, QIC: (Hold) "The RBA will wait on the hope that recent rate and tax cuts filter through to consumer spending and that the US and China will agree on a phase 1 trade agreement."

Noel Whittaker, QUT: (Hold) "I don't think the world is out of its financial problems yet."

Nerida Conisbee, REA Group: (Hold) "For now, it is likely rates will remain on hold. We have had three cuts in quick succession and so far the economic response has been muted. At this stage, it is likely that rates will be cut in February however it will depend on data coming out over summer."

Christine Williams, Smarter Property Investing: (Hold) "[The RBA is holding due to] stability within the housing and employment markets."

Mala Raghavan, University Of Tasmania: (Hold) "There is a high possibility that the RBA will not cut the cash rate in December 2019. The rate is low at 0.75% and some sectors such as housing appears to be rebounding, especially in the two major cities - Sydney and Melbourne. However, if this rebound does not translate into rising consumer spending and or investment activities, then we might see another rate cut around February 2020. Meanwhile if there is some form of fiscal stimulus, that might alleviate RBA's pressure to reduce the cash rate further next year."

Dr Andrew Wilson, independent economist: (Hold) "Latest economic data must remain a concern to the Bank with no bounce evident from three recent cuts to official rates and tax cuts. Latest jobless and wages data have however moved in the wrong direction and certainly shortened the odds for another cut to official rates - perhaps as early as February next year. The RBA has clearly indicated its preparedness to continue to cut rates and has also flagged the possibility of initiating quantitative easing policies if rates move to zero levels with no effect on the economy. A December cut is unlikely, regardless of recent mixed data, would be diluted by the distractions of the lengthy holiday period and may be perceived as a counterproductive desperation move. Housing markets have predictably been activated with lower rates but strong prices growth has been restricted to Sydney and Melbourne where prices remain below the previous peaks of two years ago – reflecting those markets currently in "catch-up mode" driven by buyers chasing notional discounts."

Other participants: Bill Evans, Westpac.