No rate cuts yet + New Housing plan for NSW
Interest rates are expected to remain high, with some economists now forecasting cuts no earlier than mid-2025, as wage growth and low unemployment keep inflation persistent. At the same time, housing affordability remains a major challenge, particularly in New South Wales (NSW). Data suggests more expensive property values have now dropped a tad in NSW, but the medium values or first home buyer sector has remained buoyant and unaffordable for some. To address this, the NSW government on Friday announced that it will launch the Housing Delivery Authority (HDA) in 2025, enabling large residential developments to bypass local councils for faster approvals. The initiative aims to boost supply and ease affordability pressures, by stripping the power of councils to block these large residential developments in NSW. While some developers will ultimately profit from this the supply issue will be addressed.
Wage Growth and Unemployment: The RBA is Watching Closely
Australia’s annual wage growth slowed to 3.5 per cent in September, its lowest in over two years and unemployment remains steady at 4.1 per cent. Economists argue this shows an economy cooling but still strong, with solid job growth and record workforce participation. For the Reserve Bank of Australia (RBA) to consider cuts, unemployment may need to rise further to signal a slackening in the labour market.
Meanwhile, global factors add complexity to the landscape. In the US, despite recent rate cuts, Federal Reserve Chair Jerome Powell stated this week that their economy shows “no signals” of a need to lower rates quickly. With Trump in power, he will look to push through his initiatives such as tariffs, cutting taxes and regulation, not necessarily focusing on welfare – perhaps an understatement. This has had a profound impact on markets around the world.
Our money markets here in Australia - fixed rates
Our own money markets here in Australia, have somewhat let go of this hope that the RBA will be dropping the cash rate soon. See here the 3-year Australian bond yield curve, which economists suggest, has been spurred on by Trump’s election win and also our economy not cooling enough. Similar to last month, the yield curve is trending north which will keep our fixed rates where they are, for the time being. Money markets are saying that the cash rate in 3 years, will only drop by 17 basis points - not even one rate cut. Money markets tend to overreact nonetheless, as experts will suggest.
Property Market: Cooling Momentum, Tight Supply
Australia’s property market presents mixed signals. Slower purchasing activity, falling auction clearance rates, and minor or negative growth in cities like Melbourne and Hobart indicate cooling momentum. However, tight labour markets and persistently low housing supply are keeping prices stable in many areas at the medium, to entry-level price point, which isn’t ideal for first home buyers.
Click the chart above, for the full version of the November 2024 Corelogic property report.
CoreLogic’s Tim Lawless recently highlighted that the construction outlook remains weak, with declining approvals and labour shortages slowing progress. While some policies to fund infrastructure and reduce developer costs could help, meaningful supply increases will take time.
NSW’s New Housing Delivery Authority (HDA): A Move to Boost Supply
To address the housing shortage, the NSW government has introduced a fast-track housing approval process through the new Housing Delivery Authority (HDA). Starting in 2024, the HDA will rezone land and approve large developments without needing local council approval. Targeting projects worth $60 million in Greater Sydney and $30 million in regional NSW, the initiative aims to streamline delays and boost supply for first home buyers and essential workers.
While developers have welcomed the move, experts caution that third-party approvals, such as water and fire permits, must also be addressed for the program to succeed.
If implemented well, the HDA could bring NSW in line with states like Victoria, where supply-focused policies have moderated price growth and improved affordability for first home buyers.
Final Thoughts
With no immediate rate cuts in sight and the housing market showing mixed signals, buyers and borrowers face a complex landscape. Wage growth and employment resilience are keeping the RBA cautious, and affordability challenges remain heightened due to tight supply and cooling construction activity.
Initiatives like NSW’s Housing Delivery Authority offer a glimmer of hope, aiming to streamline approvals and boost supply where it’s needed most. While these policies may take time to deliver results, they signal an important step toward addressing housing affordability in the long term.
As the economic environment evolves, staying informed is key. Whether you’re considering fixing your loan, planning a property purchase, or just looking to understand your options, we’re here to guide you every step of the way.
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