Rates are predicted to rise next year, but will it slow property prices?

by Julia Corderoy28 Nov 2014
While a monthly Reserve Bank survey unanimously predicts the cash rate to be left on hold at the central bank’s last board meeting for the year next Tuesday, 94% are expecting the cash rate to move next year.

According to the survey conducted by finder.com.au, 92% of economists and industry experts (34 out of 37) surveyed predict that the next cash rate move will be an increase, with 70% of them expecting an announcement in the second half of the year. 

The survey also revealed that despite most of the experts betting the cash rate will rise next year, 69% believe property prices will continue to climb.

“Most of the experts in the survey are expecting property prices to continue rising however, they don’t expect the higher costs will dramatically impact the first home buyer market. Two in three (64%) are expecting the same level of first homebuyers next year compared to this year, with only five expecting fewer first home buyers,” Michelle Hutchison, money expert at finder.com.au said.

“There were also 14% of respondents who expect property prices to stabilise, while 17% are betting on property prices to fall next year.”

Interestingly, 8% (3 out of 37) are forecasting the next cash rate move to be a decrease – a shift from last month when only one respondent predicted another cash rate cut.

Hutchison said the survey showed that wider economic pressures were impacting the cash rate predictions.

“Of the 37 experts, many raised several key issues that influenced their predictions including the need for stability, a slow economy, a weakening Australian Dollar and no unexpected movements in the past month.

“It was also interesting to find some experts in the survey discussing the reality of a rate cut next year, with factors that could occur such as a falling housing market and slower growth in China and other foreign economies.”