One of Australia’s biggest finance experts has made three key predictions for interest rates and the housing market including a further 10 per cent fall in property prices.
Christopher Joye, co-founder of $7billion fund manager Coolabah Capital, accurately forecasted the Covid boom and subsequent fall in property prices.
But now he warns a string of interest hikes is still to come which will spark an economic crisis – and send house prices further downwards.
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Christopher Joye (pictured), who is the co-founder of Coolabah Capital, made three predictions about interest rate hikes and the fall in property prices
After nine consecutive hikes in interest rates, Mr Joye believes the Reserve Bank will hike rates three more times ‘before they pause and paddle’, he told The Barefoot Investor, Scott Pape.
Mr Joye says those interest rate rises will then have a significant effect on the economy which will be ‘widespread and painful’.
And for his third warning, he says that will trigger a fall in property prices of at least another 5 per cent to 10 per cent.
The latter prediction is in line with a previous forecast Coolabah Capital founder made.
‘Across the five capital cities, index prices are down 10 per cent right now, and they’re falling at more than 1 per cent a month. So we are one month away from the biggest losses on record in 40 years,’ he told Mr Pape.
Mr Joye claimed in October 2021 that property prices would drop between 15 to 25 per cent due to rate hikes from the central bank.
The pair were also critical of the Reserve Bank, with Pape saying the central bank had failed to ‘keep inflation from rising out of control’.
It comes as Aussie Home Loans founder John Symond predicts that house prices wouldn’t start rising again until 2024 – as he too blasted the RBA.
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Mr Joye claimed that property prices would fall another five to 10 per cent due to rate hikes (pictured, houses in Sydney)
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Mr Joye spoke with fellow finance manager Scott Pape (pictured), who is better known as the Barefoot Investor
Mr Symond, who founded Aussie in 1992, said the RBA would be forced to cut rates in 2024 to ward off a steep economic downturn, and that would cause house prices to rise again like they did in 2021 and early 2022.
‘I’m confident that this time next year, house prices will be stronger than they are now,’ he told Daily Mail Australia.
Mr Symond said the lead-up to rate cuts at the end of 2024 would be a signal to buyers to get back into the market.
‘Once they start coming off again, which probably will be towards the end of next year, mid to the end of next year and you see rates edging down by half a per cent, that will be a signal to home owners “we’ve got to have a hard look at this”,’ he said.
The Commonwealth Bank is expecting the RBA to cut rates by 0.5 percentage points in the December quarter of 2023, followed by two more rate cuts by the end of June 2024.
Mr Symond did not expect such a rapid reversal, and thought rate declines would not occur until late 2024 when the current rate squeeze would have caused a sharp drop in consumer spending, going close to triggering a recession.
‘If they continue going up over the next six months, they are taking that risk,’ he said.
‘I disagree with the governor when he said that interest rate rises aren’t felt straight away – Australia unlike Europe and the US, we’re a very, very, very housing-centric country and as soon as there’s an interest rate rise, it’s felt immediately.’
Just as rate rises hit Sydney and Melbourne first, Mr Symond said future rate reductions would also prompt a rapid re-investment in housing, with consequent price increases.
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Aussie Home Loans founder John Symond (pictured right with wife Amber) predicts house prices will recover again in 2024 when the Reserve Bank is forced to cut interest rates
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Mr Symond was scathing of Reserve Bank of Australia Governor Philip Lowe (pictured) for promising in 2021 rates would stay on hold until 2024 only to have since raised them nine times
Mr Symond predicted that when rates were cut in 2024, bank variable rates would drop by less than the RBA cash rate easing – as occurred in late 2008 during the Global Financial Crisis.
‘Interest rates, when they start dropping, you might find some of the banks might not drop the whole Reserve Bank amount,’ he said.
That’s because the banks and non-bank lenders source about 40 per cent of their funding from global money markets instead of from the Reserve Bank of Australia.
The banks’ global borrowing costs could mean they will likely be stingy in passing on the full rate reductions to mortgage holders.
But he said the banks would be unlikely to raise variable rates through 2023 in excess of RBA moves, regardless of what their borrowing costs might be.
‘In this environment when interest rates have gone up so sharply, in such a short period of time, the banks would not be game enough – they’d get slaughtered by both the media and customers,’ Mr Symond said.
When it came to the performance of the Reserve Bank, Mr Symond was scathing of Dr Lowe for promising in 2021 rates would stay on hold until 2024 only to have since raised them nine times.
‘The guy obviously knows his stuff but in this particular aspect of his job, it’s very unfortunate that this aspect is a very, very big and sensitive area of his role, he got it so wrong,’ he said.
‘On that, you’d have to mark him as a fail.’
Source: daily mail