PHOTO: Property prices are about to correct. FILE
The rising cost of living has increased the likelihood that a downturn will come sooner than expected for the Sydney property market.
Inflation figures for the December quarter released Tuesday showed rises in the costs of goods and services were within the Reserve Bank’s targeted range, raising the prospect of an early cash rate rise.
The Consumer Price Index rose 1.3 per cent in the last three months of 2021, bringing the annual rate of inflation to 3.5 per cent.
Core inflation, the change in the cost of goods and services excluding those from the food and energy sectors, also rose 1 per cent to an annual rate of 2.6 per cent.
Market watchers have pointed to the likelihood of a cash rate rise coming well before the Reserve Bank’s forward guidance of 2024, with some expecting interest rates to rise as early as this year.
The Reserve Bank of Australia is set to have its first policy meeting of the year on Tuesday, February 1. Picture: News regional media.
Canstar editor-at-large and money expert Effie Zahos said with core inflation well within the Reserve Bank’s inflation target, the RBA may have little choice but to raise the cash rate.
“If there is strong wage growth in the December quarter with the figures due out next month, a cash rate rise will be on the cards in 2022,” said Ms Zahos.
ANZ head of Australian economics David Plank said a rate rise in August or November this year was a definite possibility.
“You could say we are sustainably within the two to three per cent band. The issue is, when is the RBA going to be confident enough about the sustainability of the labour market and wages to pull the trigger?” Mr Plank said.
He said when the cash rate did rise it would affect both the Sydney and national property markets. ANZ recently forecast property prices would drop three per cent nationally in 2023 due to higher interest rates.
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