Aussie Home Loans founder John Symond predicts house prices will rise again in 2024 as interest rates fall again.
The one percentage point increase in the RBA’s last quarter has pushed cash rates to a new 10-year high of 3.35 percent — with Governor Philip Lowe signaling further increases in the coming months.
Three of Australia’s Big Four banks – Commonwealth, Westpac and ANZ – now expect the RBA to raise rates twice more to a new 11-year high of 3.85%.
But Mr Symond, who founded Aussie in 1992, said the RBA would be forced to cut rates in 2024 to avert a sharp economic downturn, and house prices would rise again, as they did in 2021 and early 2022.
“I am confident house prices will be stronger by this time next year than they are now,” he told Daily Mail Australia.
Aussie Home Loans founder John Symond (pictured right with wife Amber) predicts house prices will bounce back in 2024 when the Reserve Bank is forced to cut interest rates
Mr Symond said the run-up to interest rate cuts in late 2024 would be a signal for buyers to get back into the market.
“Once they start to decline again, which will probably be towards the end of next year, mid or late next year and you see rates drop half a percent, that will be a signal to homeowners.” need to look closely at this,” he said.
The Commonwealth Bank expects the RBA to cut rates by 0.5 percentage points in the December quarter of 2023, followed by two more rate cuts by the end of June 2024.
Mr Symond had not anticipated such a rapid turnaround, and the fall in the pace of thinking would not occur until late 2024, when the current interest rate pressures would have led to a sharp fall in consumer spending, potentially triggering a recession.
“If they keep going up in the next six months, they’re taking that risk,” he said.
“I disagree with the governor when he said rate hikes aren’t immediately felt – Australia, unlike Europe and the US, we’re a very, very, very housing-focused country and once there’s an interest rate hike, it’s immediately palpable.’
Just as rate hikes had a sudden impact, Mr Symond said future rate cuts would also lead to rapid reinvestment in housing, resulting in price increases.
Upscale waterfront suburbs in interest-sensitive markets like Sydney were likely to recover first, such as in late 2020 when interest rates were cut to a record low of 0.1 percent.
“The upper areas of anywhere near water, I believe, will be more resilient than other suburbs,” Mr Symond said.
Upmarket suburbs near the water in interest rate sensitive markets like Sydney were likely to recover first, such as in late 2020 when interest rates were cut to a record low of 0.1 per cent (pictured are houses in Point Piper in the east of the country). suburbs)
Mr Symond, who pioneered non-bank lending three decades ago, predicted that when interest rates are cut in 2024, the banks’ floating rate would fall by less than the relaxation of the RBA cash rate – as happened at the end of 2008 during the global financial crisis.
“When interest rates start to fall, you’ll find that some banks don’t cut the entire amount of the Reserve Bank,” he said.
That’s because the banks and non-bank lenders get about 40 percent of their funding from global money markets rather than from the Reserve Bank of Australia.
Banks’ global borrowing costs could mean they are likely to be slow to pass full rate cuts on to mortgage holders.
But he said the banks are unlikely to raise floating rates above RBA moves through 2023, regardless of what their borrowing costs might be.
“In this environment, where interest rates have risen so much in such a short period of time, the banks wouldn’t be playful enough — they would be slaughtered, by the media and customers alike,” Symond said.
In terms of the performance of the Reserve Bank, Mr. Symond scathing for Dr Lowe for promising to put rates on hold for 2021 until 2024, only to have raised them nine times since then.
“The guy obviously knows his stuff, but in this particular aspect of his job, it’s very unfortunate that this aspect is a very, very big and sensitive part of his role, he was so wrong,” he said.
“That’s why you should mark it as unsatisfactory.”
Inflation rose at a 32-year high of 7.8 percent last year, a level more than double the RBA target of 2 to 3 percent, which Symond said made rate cuts unlikely in 2023.
“I’m more confident that rates will come down in 2024, maybe midway through to later than this year,” he said.
When it came to the performance of the Reserve Bank, Mr. Symond scathingly to Reserve Bank of Australia Governor Philip Lowe (pictured outside his Randwick home in Sydney) for promising rates would remain on hold for 2021 until 2024, but he has since raised them nine times. time
The man who spearheaded Aussie Home Loans TV commercials in the 1990s also had a message for older Australians, saying they were having a harder time than today’s young borrowers, with interest rates reaching 17.5 per cent 33 years ago.
Houses are really much more expensive
SYDNEY: The median home price of $220,628 cost 5.7 times an average full-time salary of $30,966 after a 20 percent down payment in November 1992.
The median home price of $1,205,618 in January 2023 was 10.4 times an average full-time salary of $92,030 after a 20 percent down payment.
MELBOURNE: The median home price of $156,628 cost 4.04 times an average full-time salary of $30,966 after a 20 percent down payment in November 1992.
The median home price of $900,107 in January 2023 was 7.8 times an average full-time salary of $92,030 after a 20 percent down payment.
Sources: CoreLogic, Australian Bureau of Statistics
The entrepreneur, who paid 21 percent interest on his mortgage, said those “boomers” could buy homes at much lower prices as a percentage of median income.
“The stock market crash of ’87 caused a lot of pain for five or six years, but take that away, the baby boomers had it pretty good,” he said.
“Housing was more affordable, baby boomers didn’t have to go to war – there was some conscription, but the percentage of baby boomers going to Vietnam is very small and I think the baby boom era was a golden age.
“I remember when I was a young clerk, the average price of a house in the 1970s was about $50,000 — if I say it was easier, fewer people got mortgages back then because money wasn’t a commodity like it is where banks nowadays borrow offshore against their balance sheets.’
In November 1992, Sydney’s median house price of $220,628 was expensive, but an average $30,966 full-time worker with a 20 percent down payment owed the bank 5.7 times their annual salary.
Just over three decades later, Sydney’s median home price of $1,205,618 is so expensive that an average $92,030 full-time worker, with a down payment, would have a dangerous debt-to-income ratio of 10.5.
That also followed a 15 percent plunge in the year to January, which barely reversed the 27.7 percent surge during the pandemic, CoreLogic data showed.
The Australian Prudential Regulation Authority considers anyone owed more than six times their annual salary to be too much.
Mr Symond sold the remainder of his stake in Aussie to the Commonwealth Bank in 2017, 25 years after heading Australia’s first non-bank lender.
Financial deregulation allowed lenders to raise funding from abroad instead of relying on customer deposits to fund home loans.