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Speaker 1: They are real change of pace because we know the

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Speaker 1: Reserve Bank of Australia, well, they sort of did what

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Speaker 1: we were not expecting yesterday and they kept those interest

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Speaker 1: rates on hold, leaving the official cash rate at three

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Speaker 1: point eight five percent. Now, some experts and the big

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Speaker 1: four banks were anticipating that rate cut, and I think

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Speaker 1: a lot of homeowners were, which is now hopefully going

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Speaker 1: to happen in August. But what does it all mean

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Speaker 1: for the housing market? Well, joining me on the line

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Speaker 1: is Cotalities head of research, Eliza Owen. Good morning to you.

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Speaker 2: Eliza, Hey, good morning, Thanks for having me.

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Speaker 1: Yeah, thank you so much for your time. Now, rates

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Speaker 1: kept on hold for now. It was a mixed reaction,

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Speaker 1: wasn't it. Most of us were expecting that they were

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Speaker 1: going to be cut.

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Speaker 2: Yeah, there was a lot of commentary leading up to

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Speaker 2: the rate decision that there's no longer the justification to

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Speaker 2: keep the cash rate at three point eight five percent,

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Speaker 2: and that's because you've had things like GDP growth come

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Speaker 2: in in the past few weeks. It showed a really

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Speaker 2: weak result for the country. We've seen things like a

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Speaker 2: monthly inflation measure which isn't as full as the quarterly

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Speaker 2: inflation read that we get, but it did show a

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Speaker 2: decline in inflation, and more recently we saw weak retail sales.

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Speaker 2: So all of this information told us that economic activity

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Speaker 2: was slowing, inflation was coming down. But the RBA made

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Speaker 2: it quite clear in their meeting yesterday that they wanted

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Speaker 2: to wait for the full inflation quarterly report so they

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Speaker 2: can really confirm that inflation is where they want it

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Speaker 2: before they move rates lower. And I think that surprised

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Speaker 2: a lot of people, but it really did reinforce that

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Speaker 2: they're erring far on the side of caution. Yeah.

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Speaker 1: Now, I mean, what does it mean when you look

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Speaker 1: at at home values, because we're sort of hearing anecdotally

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Speaker 1: that over the last couple of weeks, you know, housing

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Speaker 1: prices of have shot up in recent weeks due to

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Speaker 1: some of those cuts.

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Speaker 2: Yes essentially, yeah, yeah, so we had to cut back

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Speaker 2: in and we also had one in May, and what

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Speaker 2: that's done to the property market is clearly started to

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Speaker 2: push prices higher because lower interest rates mean you can

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Speaker 2: take out more debt. More debt means you've got more

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Speaker 2: to spend on housing, and we've seen that, particularly in

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Speaker 2: the Darwin market. It's Australia's most affordable capital city market,

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Speaker 2: and since rates moved lower on February nineteenth, we've seen

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Speaker 2: about a six percent increase in Darwin home values. That

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Speaker 2: compares to a two percent increase in national home values.

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Speaker 2: So it's clear that Darwin is essentially the biggest benefactor

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Speaker 2: in terms of value uplift from rate cuts, which is

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Speaker 2: good news for homeowners but obviously a challenge if you're

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Speaker 2: trying to get into the market.

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Speaker 1: Yeah, so talk us through I guess some of what

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Speaker 1: we are saying around around the Darwin market or even

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Speaker 1: know out in Palmerstone.

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Speaker 2: So over the past six months, we've seen not just

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Speaker 2: a consecutive set of increases in home values monthly across

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Speaker 2: the city, but we've seen a bit of an acceleration.

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Speaker 2: So the Darwin market picked up by two point one

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Speaker 2: percent in the month of May, we saw a one

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Speaker 2: point five percent increase in the month of June, and

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Speaker 2: the cumulative increase to date is about seven percent across

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Speaker 2: the entire market. It's a pretty broad based increase, so

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Speaker 2: we've seen uplifts in areas like Palmerston as well as

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Speaker 2: well as Darwin City and it really is just that

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Speaker 2: kind of broad based effect that I guess cheaper debt

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Speaker 2: levels can create in housing market.

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Speaker 1: Is there a limit to how much the falling interest rates, like,

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Speaker 1: if we do see another cut, how much they can

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Speaker 1: then push those values up or I guess you know,

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Speaker 1: the market will do what the market will do.

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Speaker 2: There is a bit of a limit because things are

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Speaker 2: quite different in the market now compared to say, the

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Speaker 2: last rate cutting cycle, which took place between the sort

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Speaker 2: of early twenty twenty to November twenty twenty, and then

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Speaker 2: the cash rate was held at zero point one percent

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Speaker 2: through to April twenty twenty two. Now back then or

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Speaker 2: since then, rather, market values nationally have risen by about

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Speaker 2: forty percent, So housing is much less affordable than what

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Speaker 2: it was five years ago, and that means that even

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Speaker 2: its rates move lola, it's still hard to get into

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Speaker 2: the market. We also see the consumer sentiment now is

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Speaker 2: a lot lower, and that's because of things like this

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Speaker 2: whole Trump tariff uncertainty and what that might do to

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Speaker 2: economic activity, and that's causing buyers to kind of hold

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Speaker 2: off big financial decisions as well. So that means that

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Speaker 2: they will be a bit of a limit to what

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Speaker 2: rate cuts do to the market. But for a market

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Speaker 2: like Darwin, I suppose the strength is its relative affordability

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Speaker 2: and there's more room for it to grow compared to

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Speaker 2: other capital cities.

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Speaker 1: Yeah, and I mean, I guess when you look at

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Speaker 1: the housing market as well in Darwin is there's not

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Speaker 1: a huge amount of bailable at the moment either.

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Speaker 2: That's right. So stock levels are pretty tight relative to

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Speaker 2: historic terms. So the flow of new listings coming to

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Speaker 2: market is pretty subdued. And again that could be because

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Speaker 2: it's taken a while for this market to take off,

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Speaker 2: and sellers have been holding off to wait for more

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Speaker 2: price growth before they put their property on the market.

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Speaker 2: Of course, there's issues with the construction sector that have

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Speaker 2: evolved across the country and really become quite clear through

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Speaker 2: the COVID period. And again I think just that economic

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Speaker 2: uncertainty might see sellers holding back a bit as well,

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Speaker 2: and that all contributes to the additional upward pressure on prices.

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Speaker 1: Now, what are some of the forward projections, I mean,

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Speaker 1: beyond sort of now and beyond August. I guess we're

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Speaker 1: all waiting to see now whether there's kind of be

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Speaker 1: a right cut in August.

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Speaker 2: Look, unless there's a big surprise in the inflation data.

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Speaker 2: I think it will confirm what the RBA needs needs

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Speaker 2: to know for them to move the rates lower in

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Speaker 2: their August meeting. Beyond that, most of the major economic

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Speaker 2: forecasting houses are predicting at least one more rate cut.

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Speaker 2: Of the big four banks, you've got two that are

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Speaker 2: predicting will finish the year with a three point three

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Speaker 2: five percent cash rate, and the other two are predicting

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Speaker 2: a three point one percent cash rate. So there's definitely

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Speaker 2: more cuts that would appear to come down the line,

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Speaker 2: you know, all else being steady, I suppose that if

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Speaker 2: we don't get any nasty inflationary surprises before the end

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Speaker 2: of the year.

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Speaker 1: Well Coatalities head of Research, Eliza Owen, great to speak

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Speaker 1: with you this morning. Thank you so much for your

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Speaker 1: time anytime.

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Speaker 2: Thank you, thank you.

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Speaker 1: You two