Rate cuts expected in 2024 as the Reserve Bank holds the March cash rate at 4.35 per cent

Aussie homeowners have proven their resilience, holding tight to their properties despite interest rates that it was feared would force desperation sales.

And the reprieve of a rate cut this year looks ever more likely, a leading economist says.

The Reserve Bank of Australia left the nation’s cash rate unchanged at 4.35 per cent at the first meeting in March.

Mortgagees meeting heftier repayments are off the hook for another month, with the RBA electing again to keep an eye on inflation, which the RBA said continues to moderate, in line with its forecast.

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Domain’s distress listing stats show the number of homes being sold under duress have dropped, when measured annually, across the capital cities.

Homeowners have kept their chins above water in a trying economic environment, especially in Perth, where Domain’s February stats reveal distressed sale listings are at an all-time low of 1. 6 per cent.

The least number of distress listings are in Hobart, comprising 0.7 per cent of the February market. Darwin has the most, at 4.6 per cent of properties for sale.

Although mortgage repayments are steady, experts warn the cost of buying a home in 2024 could still continue to rise.

The rate hold arrives as one of the largest real estate agencies in Australia, Ray White, predicts house prices could lift by 10 per cent this year.

Ray White’s chief economist Nerida Conisbee said a strong start to the year’s housing market, with a 2.2 per cent uptick in prices according to Neoval data, indicates further price increases are realistic.

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“If this rate of growth continues, it is possible that Australian house prices will increase more than 10 per cent this year,” she said in Ray White’s weekly economic report.

“Fundamentally, there are many reasons why the outlook for house prices will be stronger than last year.”

The main drivers are large-scale population growth and a chokehold on supply due to construction costs and slow delivery, she said.

“In 2023, we needed 250,000 new homes but built only 175,000,” Conisbee said. “The pipeline is looking even worse. Over the past 12 months there have only been 163,000 homes approved. Even in a more normal construction environment, not all of these homes will be built. Conditions are slowly improving in the construction sector but they won’t be solved this year. Population growth will ease this year, but so too will the number of new homes built.”

The January inflation rate clocked in at 3.4 per cent. “With the Reserve Bank of Australia aiming for interest rates at between 2 to 3 per cent, the odds of a rate cut are rising,” Conisbee said. “So much so that as of (early March), markets were pricing in three cuts over the next 12 months.”

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Domain’s chief of research and economics Dr Nicola Powell says the market is anticipating two rate cuts this year.

“However, ongoing wage increases, upcoming tax cuts and elevated migration could push these cuts until later in the year,” she said. “Historically, this has played out positively for the housing market, resulting in a lift in consumer sentiment, which tends to drive a positive outcome for housing turnover.”

Domain property editor Alice Stolz said there is evidence the market is already responding in a positive fashion.

“The ‘will-they’ or ‘won’t they’ question in regards to rate cuts has already been fueling demand, she said. “Today’s hold decision may spur fence-sitting buyers into action, rather than risk waiting and for prices to rise even further.

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”Recent house price growth may well be a bellwether of what’s ahead… It increasingly feels hard to see the RBA reducing rates if house prices keep climbing at the current pace.

”Either way, this may be the rare time there is a sweet spot for buyers and sellers; buyers have more choice and sellers are reaping the benefit of that depth. For better or worse, buyers and sellers are in the same boat.”

The early autumn market is anticipated to flourish under stable rate conditions.

LJ Hooker Group’s head of research Mathew Tiller said in a statement that the affordable sector of the market is propping up capital growth and driving activity.

He said would-be vendors who had been considering listing may do so given another rate hold provides a measure confidence, and renters may also opt to make their move into ownership.

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“Everyone is looking for affordability

at the moment and this is boosting the middle to lower priced end of the market,” Tiller said. “The rental market remains tight and that is motivating some renters, who have saved a deposit, to make the transition to home ownership.

“This price point also encompasses first home buyers, investors and even downsizers so there is solid competition in this segment.

“Those who are continuing to struggle with higher interest rates are also looking to list because they are more comfortable doing so now that we have seen prices rise for 13 consecutive months.

“The longer the RBA holds rates steady, the more confidence people will have they are not going any higher.

“People will be comfortable within their household budgets and repayments, particularly as wage growth outpaces inflation – so as we get further to the second half of the year and there is more talk of rate cuts that will boost confidence and sentiments from both buyers and sellers.”