Aussie Home Loans founder reveals why house prices will go up in 2024

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Aussie Home Loans founder John Symond predicts house prices will start rising again in 2024 as interest rates come back down, criticized the Reserve Bank chief for being a failure and says the baby boomers had much more than today’s borrowers.

The latest quarter of the RBA’s one percentage point increase has pushed the cash rate to a new 10-year high of 3.35 percent, with Governor Philip Lowe signaling further increases in the coming months.

Three of Australia’s big four banks – Commonwealth, Westpac and ANZ – now expect the RBA to raise rates two more times to a new 11-year high of 3.85 percent.

But Symond, who founded Aussie in 1992, said the RBA would be forced to cut rates in 2024 to avoid a sharp economic downturn, and that would send house prices back up as they did in 2021 and early 2022. .

“I’m sure next year house prices will be stronger than they are now,” he told Daily Mail Australia.

Aussie Home Loans founder John Symond (pictured right with his wife Amelia) predicts house prices will pick up again in 2024 when the Reserve Bank is forced to cut interest rates.

Symond said the run-up to rate cuts at the end of 2024 would be a signal for buyers to return to the market.

“Once they start to go down again, which will probably be late next year, mid to late next year and you see rates drop half a percent, that’s going to be a signal to homeowners,” we’ve got to look at. this carefully,” he said.

The Commonwealth Bank expects the RBA to cut rates by 0.5 percentage point in the December 2023 quarter, followed by two more rate cuts by the end of June 2024.

Symond did not expect such a quick reversal and thought that the rate falls would not occur until late 2024, when the current rate squeeze would have caused a sharp drop in consumer spending, possibly triggering a recession.

“If they continue to go higher for the next six months, they are taking that risk,” he said.

“I disagree with the Governor when he said that interest rate increases are not felt immediately – Australia, unlike Europe and the US, we are a very, very, very housing-focused country and as soon as there is an increase in interest rates it is felt immediately.

Just as rate hikes had a sudden impact, Symond said future rate cuts would also trigger rapid reinvestment in housing, with consequent price increases.

Upmarket suburbs near the water in interest-rate-sensitive markets like Sydney are likely to bounce back first, as they did in late 2020 when rates fell to a record low of 0.1 percent.

“In my opinion, the upper areas of anywhere near the water are going to be more resilient than other suburbs,” Symond said.

Upmarket suburbs near the water in interest-rate-sensitive markets like Sydney are likely to bounce back first, as they did in late 2020 when rates fell to a record low of 0.1 per cent (pictured, the houses in Point Piper on the eastern outskirts)

Upmarket suburbs near the water in interest-rate-sensitive markets like Sydney are likely to bounce back first, as they did in late 2020 when rates fell to a record low of 0.1 per cent (pictured, the houses in Point Piper on the eastern outskirts)

Symond, who pioneered non-bank lending three decades ago, predicted that when rates were cut in 2024, banks’ variable rates would fall less than the RBA’s cash rate easing, as occurred in late 2008 during the global financial crisis.

“Interest rates, when they start to fall, some of the banks may not reduce the total amount of the Reserve Bank,” he said.

This is because banks and non-bank lenders get around 40 per cent of their funding from global money markets rather than the Reserve Bank of Australia.

Banks’ global borrowing costs could mean they are likely to be slow to pass through full rate cuts to mortgage holders.

But he said banks are unlikely to raise variable rates through 2023 above the RBA’s moves, regardless of what their borrowing costs may be.

“In this environment where interest rates have risen so sharply, in such a short period of time, banks would not be active enough: they would be killed by both the media and customers,” Symond said.

When it came to the Reserve Bank’s performance, Symond was scathing at Dr. Lowe for promising that in 2021 rates would be kept on hold until 2024 only to have increased them nine times since then.

“Obviously the guy knows what he’s doing, but in this particular aspect of his job, it’s very unfortunate that this aspect is a very, very large and sensitive area of ​​his role, he did it so poorly,” he said.

‘In that, you would have to mark it as a fail.’

Inflation last year rose to a 32-year high of 7.8 percent, a level more than double the RBA’s target of 2 to 3 percent, which Symond said makes rate cuts are unlikely in 2023.

“I would be more confident that rates will come down during 2024, maybe mid to later, than this year,” he said.

When it came to the Reserve Bank's performance, Symond was scathing at Reserve Bank of Australia Governor Philip Lowe (pictured outside his Randwick home in Sydney) for promising that in 2021 rates would stay the same. on hold until 2024 only to have them uploaded nine.  times

When it came to the Reserve Bank’s performance, Symond was scathing at Reserve Bank of Australia Governor Philip Lowe (pictured outside his Randwick home in Sydney) for promising that in 2021 rates would stay the same. on hold until 2024 only to have them uploaded nine. times

The man who headlined the TV commercials for Aussie Home Loans during the 1990s also had a message for older Australians saying they made it harder than young borrowers today, with interest rates reaching 17.5 per cent ago. 33 years.

Houses are really much more expensive

SYDNEY: The median home price of $220,628 cost 5.7 times a median full-time salary of $30,966 after a 20 percent deposit in November 1992.

The median home price of $1,205,618 in January 2023 was 10.4 times the median full-time salary of $92,030 after a 20 percent deposit.

MELBOURNE: The median home price of $156,628 cost 4.04 times a median full-time salary of $30,966 after a 20 percent deposit in November 1992.

The median home price of $900,107 in January 2023 was 7.8 times an average full-time salary of $92,030 after a 20% deposit.

Sources: CoreLogic, Australian Bureau of Statistics

The businessman, who paid 21 percent interest on his mortgage, said those boomers were able to buy homes at much lower prices as a percentage of median income.

“The 1987 stock market crash caused a lot of pain for five or six years, but other than that, the baby boomers had a pretty good time,” he said.

“Housing was more affordable, baby boomers didn’t have to go to war; there was some conscription, but the percentage of baby boomers that went to Vietnam is very small and I think the baby boomer era was a golden age.

“I remember when I was a young law clerk, the median home price in the 1970s was around $50,000. When I say it was easier, fewer people were getting home loans because money wasn’t a commodity like it is”. today, where banks take offshore loans against their balance sheets.’

In November 1992, the median Sydney house price of $220,628 was high, but an average full-time worker with $30,966 and a 20 percent deposit owed the bank 5.7 times his annual salary.

Just over three decades later, Sydney’s median home price of $1,205,618 is so expensive that an average full-time worker on $92,030, with a deposit, would have a dangerous debt-to-income ratio of 10.5.

That also followed a 15 percent drop in the year through January that barely undid the 27.7 percent rise during the pandemic, CoreLogic data showed.

The Australian Prudential Regulation Authority considers anyone who owes more than six times their annual salary to be overcommitted.

Symond sold the remainder of his stake in Aussie to Commonwealth Bank in 2017, 25 years after he was the head of Australia’s first non-bank lender.

Financial deregulation allowed lenders to raise funds from abroad instead of having to rely on customer deposits to finance mortgage loans.