Nation’s Experts Split On Cash Rate Rise
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Nation’s Experts Split On Cash Rate Rise

A survey of economists unsure of rate rise before the end of 2022.

By Terry Christodoulou
Tue, Feb 1, 2022 11:12amGrey Clock 2 min

While almost all 36 panellists surveyed in this month’s Finder RBA Cash Rate Survey (94%) expect a cash rate hold to be announced in February, the same sentiment is not held for the year ahead.

More than half (58%) are predicting a rise this year while just 1 in 5 of the experts panelled expect the rise to happen in the first half of the year.

Graham Cooke, head of consumer research at Finder, noted a shift in expectations of a rate rise in 2022.

“A rate rise this year has moved from an ‘impossibility’ to a ‘most likely’,” said Mr Cooke.

“With some lenders indicating multiple rises to come, Australian borrowers who purchased over the last few years of rock-bottom rates may be in for a shock when their mortgage costs start to climb.”

Many experts have cited the concern of inflation and the unemployment figures reaching the RBA’s target ahead of schedule as a reason to get moving.

Ben Udy, from Capital Economics thinks that the first rate hike will come in the middle part of the year.

“While the RBA has previously said that it would not raise rates until wage growth was at least 3%, we think the strength in underlying inflation along with the tight labour market will convince the Bank to hike rates first in August and lift rates to 1.25% by the end of 2023,” Udy said.

However, opposing Ben Udy, Saul Elake of Corinna Economic Advisory states three reasons we won’t see a rate rise this year.

“One, underlying inflation has only just entered the target band after more than 5 years below it, and remains lower than in most other advanced economies.

“Two, wage inflation is nowhere near the 3.5% the RBA has said it needs to be to be consistent with inflation being ‘sustainably’ within the target band.

“Three, the RBA has a looser inflation target than most other ‘advanced’ economy central banks,” Eslake said.

It begs the question, how much will average mortgages rise when rates do.

Almost all experts believe that rates have hit rock bottom (96%).

Graham Cooke’s advice is to lock in a loan at a very low rate.

“The days of sub-2% home loans are almost behind us, and may never return. If you are in a position to lock on a very low rate with your current lender, or by switching, there has never been a better time to do it,” Mr Cooke said.

Westpac is expecting the RBA to raise the cash rate 6 times in the next 2 years, starting in August this year.

This would bring the official cash rate up from 0.10% at present to 1.50% in 2 years’ time – a jump of 1.4% on what homeowners are paying now.

On a $500,000 home loan, a rate hike from 2.00% to 3.40% would cost homeowners $369 more per month or $4,428 more per year.


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

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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.


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