Will the RBAs pause give us a FOMO phase?
So the RBA left rates on hold on Tuesday.
And good thing too. That would have been a very difficult decision to explain with monthly inflation falling quickly and wages growth going nowhere.
In fact, with the benefit of hindsight, it looks like they might have actually gone too far.
But for now, hikes are done. It’s hard to see another move north this calendar year.
And I’m not sure that realisation has fully landed for people.
But when it does..? What happens when Jack Public wakes up and realises that there’s no more rate hikes on the horizon, and that the prospect of any further declines in house prices has evaporated?
FOMO. Fear of missing out. You get FOMO. That’s what happens.
Louis Christopher at SQM research agrees:
“I think buyer demand will increase, given another pause in interest rates,” said SQM Research managing director Louis Christopher.
“The fear of missing out is about to explode as buyers who have been waiting on the sidelines for prices to fall realise that the market has bolted, and are now responding by buying in.
“I think this will continue now that interest rates are most likely to remain on hold for some time, so it’s very likely that we will see ongoing price rises through to at least to the end of the year and probabilities are increasing that we’ll see a strong start to the calendar year 2024 in terms of price increases.”
I think that’s broadly right.
I still expect a bit of a downdraft coming off the fixed-rate reset, which should bring more homes on to the market.
And we have seen a bump in listings in recent months:
Fresh stock across Sydney jumped by 10.5 per cent to 13,780 homes last month, which is the largest amount of new stock to hit the market for any month of August since records started, SQM Research data show.
Melbourne also posted a strong start to the spring selling season. New listings climbed by 12.6 per cent to 15,075, the highest count since 2016. Canberra, which had a 22.2 per cent lift in fresh stock, recorded the largest increase for any capital city.
But I’d expect the new stock effect to be swamped by the FOMO effect.
And that’s what we’ve seen so far. The flow of new stock has been easily absorbed, and total listings are actually 2% lower than they were at this time last year!
In Sydney listings are down 6.5%, and in Melbourne they’re down 4.9%!
You’re not building price declines on the back of a shrinkage in supply like that.
“We’re not seeing a build up in stock at the moment because total listings are still below long-term averages,” Mr Christopher said. “We’ve recorded 224,530 dwellings for sale nationwide in August, which is lower than the long-term average of around 240,000 homes.”
Yep. Listings will drift higher, but FOMO is going to blow it out of the water.
And then what happens to listings when sellers realise they can wait six months and pocket an extra 10%?
Then things will really start bolting.