Is the RBA calling victory in the Inflation War?

Chris Bates

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As the second rate cut arrived in almost as many months and a debate took place on a potential double rate cut, have the RBA declared victory in the war on inflation?

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The real challenge is avoiding an economic slowdown rather than containing an inflation outbreak.

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According to the money markets, they are expecting another three rate cuts this year. With current bank home loan rates around 5.5%, we are only two more away from a psychological bank rate under 5%.

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While many suggest affordability is completely stretched, particularly in Sydney and Melbourne, if we analyse buyer demand since the first-rate rises came in 2022, many buyers have felt no genuine and sustained urgency to transact because the fear that the market would take off was always held back.

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Higher rates were a massive handbrake on buyers, and the fear that they would remain high made them very wary of taking on large mortgages.

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However, if buyers in both cities now believe that the inflation war is over, buyer confidence and the urgency to secure an asset before rate cuts will undoubtedly bring other buyers in over time and will likely grow rapidly.

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Many buyers will want to get ahead of the crowd, even though they are already part of it, and buy as soon as possible, driven by fear of prior painful experiences that suggest they may regret not acting quickly.

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With the winter months approaching next week, new listing numbers will typically decline over the coming months as the shutdown begins before the July School Holidays.

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Very few quality investments are likely to emerge between now and August, and by then, we may have not one but two further cuts at the subsequent RBA meetings, with a bank rate under 5%.

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The window to buy under much lower competition is likely gone, so if you're in the market now, don't waste the next few weekends—do your best to get a quality asset so you don't have to wait until August.

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