Interest rates: What cash rate freeze means for Coast property sector

Interest rates have remained on hold but real estate figures warn the threat of a pre-Christmas hike will put a chill on the property sector.

Real estate figures warn the threat of a pre-Christmas interest rates hike will chill the property sector ahead of its busiest buying season.

The Reserve Bank of Australia (RBA) board on Tuesday held the cash rate at 4.1 basis points, leaving interest rates on hold for just the fifth time since May 2022.

They last rose in June following 10 consecutive rises from mid-2022 to early 2023.

New bank governor Michele Bullock, presiding over her first meeting, warned of the likelihood of interest rates rising if inflation rises again.

“Inflation in Australia has passed its peak but is still too high and will remain so for some time yet,” Ms Bullock said.

“Timely indicators on inflation suggest goods price inflation has eased further, but the prices of many services are continuing to rise briskly and fuel prices have risen noticeably of late (while) rent inflation also remains elevated.

“Some further tightening of monetary policy may be required to ensure inflation returns to target in a reasonable time frame, but that will continue to depend upon the data and the evolving assessment of risks.”

The month-to-month inflation rate rose 5.2 per cent in 12 months to August, slightly higher than July, when it was 4.9 per cent.

RBA Governor Michele Bullock.

Ms Bullock, who replaced long-serving former governor Philip Lowe in mid-September, revealed the reasoning behind the bank’s decision.

There are significant uncertainties around the outlook (with) services price inflation has been surprisingly persistent overseas and the same could occur in Australia,” she said.

“There are also uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages respond to the slower growth in the economy at a time when the labour market remains tight.

“The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income (while) globally, there remains a high level of uncertainty around the outlook for the Chinese economy due to ongoing stresses in the property market.”

It is welcome news for 30,000 Gold Coasters experiencing mortgage stress - a jump of 10,000 people than May 2022 - and developers who have faced troubled water.

Colliers Gold Coast director in charge Steven King said keeping the cash rate on hold would take pressure off the market in the short-term.

“Another welcome reprieve for Gold Coast property owners which will only continue to drive growth in the region which is experiencing 15,000 newcomers every year,” he said.

Colliers Gold Coast director Steven King.

“We expect we are at or near the top of the interest rates cycle and with a housing shortage across Australia we expect property prices will continue to rise albeit at a slower rate than in the last few years.”

The Gold Coast’s construction sector has slowed dramatically as interest rates rose, struggling against high material costs and supply shortages.

These challenges have seen the demise of several developers and construction companies, including Condev and GCB Construction.

Other developers are now moving to shore up projects by becoming their own in-house builders.

However the threat of further rises, leading into the busy summer sales season concerns some of the city’s most prominent property agents.

Michael Kollosche

Michael Kollosche said further rises would hurt those at the lower end of the market and make it more difficult for them to buy.

He urged the RBA to consider other measures to reducing inflation.

“The market here is running at two speeds – the middle and high class saved a lot of money in the past three years since Covid and their wealth has increased exponentially while those at the lower end are really struggling with cost of living,” he said.

Dane Atherton

“Rising of interest rates further will do nobody any favours at that lower end of the market for those who have already tightened their belt and are not spending the way they had previously.

‘They need to look at what other leavers they can pull, including playing with loan-to-value ratios with the banks rather than interest rates.”

Harcourts Coastal boss Dane Atherton said sales had remained consistent, with supply of available units remaining low.

“We did $190m in sales in September, consistent with the heights of the Covid boom,” he said.

“Whether it is now or later, most buyers in the market place have factored in there will be at least one or two more rates rises.”