Inflation set to level out in 2023 - but more interest rate pain likely
Kanebridge News
Share Button

Inflation set to level out in 2023 – but more interest rate pain likely

Mortgage holders should brace themselves for another hip pocket hit when the RBA meets next month

By Robyn Willis
Fri, Jan 27, 2023 9:31amGrey Clock 2 min

Australian mortgage holders should prepare themselves for more pain this year, with experts predicting another interest rate rise when the RBA meets next month.

The Big Four banks expect the RBA to raise the cash rate by at least another 25 basis points, which would mark the ninth consecutive rise since May last year, and the highest peak since 1990 at 3.35 percent.

The Reserve Bank has been raising the cash rate in a bid to combat rising inflation, which currently sits at 7.8 percent, the highest level since 1990. The Australian Bureau of Statistics points to more expensive domestic holidays, international travel and higher energy prices as some of the key drivers.

While some have expressed concern that further interest rate rises could be enough to push Australia into a recession, head of research at CoreLogic, Eliza Owen, says there’s not too much cause for alarm just yet.

In the CoreLogic Property Pulse Report released this week, she points out that the RBA predicted inflation would peak at 8 percent this year and that the signs of a coming decline in the rate of inflation are already there.

“Underlying core inflation (the RBA’s preferred reading on inflation), which is measured by trimming excessively volatile components of CPI, actually fell in the quarter, from 1.9 percent in September to 1.7 percent,” she said in the report. 

“Annual core inflation is still a long way from the 2 to 3 percent target range set by the RBA, at 6.9%. However, December marked the first fall in quarterly core inflation since March 2021, following eight consecutive interest rate rises from May 2022.”

The result, she said, is that inflation may have already peaked. 

“Inflation across the combined OECD slowed to 1.8 percent in the September 2022 quarter, after peaking at 2.1 percent through June,” she said. “Forecasts from the OECD also suggest a fall in inflation through 2023 across most major economies, as global economic demand starts to slow.”

This includes Australia’s major trading partners such as China, Germany, Japan and the US.

In better news for those looking to renovate or build this year, the report also says that housing metrics indicate the rate of growth in new build costs is slowing.

“December CPI figures showed housing costs were still up a substantial 1.9% in the quarter, but this was down from a 3.2% lift in the three months to September,” Ms Owen said. 



Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Related Stories
Hong Kong Takes Drastic Action to Avert Property Slump
By ELAINE YU 01/03/2024
The Australian capitals experiencing world-class price growth in luxury real estate
By Bronwyn Allen 29/02/2024
Futuristic Sydney-Area Home of Late Australian Businessman Lists for A$9 million
By Kirsten Craze 28/02/2024
Hong Kong Takes Drastic Action to Avert Property Slump

The city’s real-estate market has been hurt by high interest rates and mainland China’s economic slowdown

Fri, Mar 1, 2024 3 min

Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city’s beleaguered economy.

The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.

The move is an attempt to revive a property market that is still one of the most expensive in the world, but that has been badly shaken by social unrest, the fallout of the government’s strict approach to containing Covid-19 and the slowdown of China’s economy . Hong Kong’s high interest rates, which track U.S. rates due to its currency peg,  have increased the pressure .

The decision to ease the tax burden could encourage more buying from people in mainland China, who have been a driving force in Hong Kong’s property market for years. Chinese tycoons, squeezed by problems at home, have  in some cases become forced sellers  of Hong Kong real estate—dealing major damage to the luxury segment.

Hong Kong’s super luxury homes  have lost more than a quarter of their value  since the middle of 2022.

The additional taxes were introduced in a series of announcements starting in 2010, when the government was focused on cooling down soaring home prices that had made Hong Kong one of the world’s least affordable property markets. They are all in the form of stamp duty, a tax imposed on property sales.

“The relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.

The tax cuts will lead to more buying and support prices in the coming months, said Eddie Kwok, senior director of valuation and advisory services at CBRE Hong Kong, a property consultant. But in the longer term, the market will remain sensitive to the level of interest rates and developers may still need to lower their prices to attract demand thanks to a stockpile of new homes, he said.

Hong Kong’s authorities had already relaxed rules last year to help revive the market, allowing home buyers to pay less upfront when buying certain properties, and cutting by half the taxes for those buying a second property and for home purchases by foreigners. By the end of 2023, the price index for private homes reached a seven-year low, according to Hong Kong’s Rating and Valuation Department.

The city’s monetary authority relaxed mortgage rules further on Wednesday, allowing potential buyers to borrow more for homes valued at around $4 million.

The shares of Hong Kong’s property developers jumped after the announcement, defying a selloff in the wider market. New World Development , Sun Hung Kai Properties and Henderson Land Development were higher in afternoon trading, clawing back some of their losses from a slide in their stock prices this year.

The city’s budget deficit will widen to about $13 billion in the coming fiscal year, which starts on April 1. That is larger than expected, Chan said. Revenues from land sales and leases, an important source of government income, will fall to about $2.5 billion, about $8.4 billion lower than the original estimate and far lower than the previous year, according to Chan.

The sweeping property measures are part of broader plans by Hong Kong’s government to prop up the city amid competition from Singapore and elsewhere. Stringent pandemic controls and anxieties about Beijing’s political crackdown led to  an exodus of local residents and foreigners  from the Asian financial centre.

But tens of thousands of Chinese nationals have arrived in the past year, the result of Hong Kong  rolling out new visa rules aimed at luring talent in 2022.


Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts

Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Related Stories
The Six Months That Short-Circuited the Electric-Vehicle Revolution
By MIKE COLIAS 15/02/2024
Marie Antoinette Chair Sells for a Record US$2.8 Million
By Eric Grossman 15/12/2023
Consumer confidence at its lowest in Australia since 1990s recession
By Bronwyn Allen 18/01/2024
    Your Cart
    Your cart is emptyReturn to Shop