Current Market Insights
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Current Market Insights
Episode 85: Rate Cut Anticipation and May Market Momentum
Hosts Ciaran O'Brien and Peter O'Malley unpack renewed activity in Sydney's property market as the first "clean weekend" since mid-April brings more buyers through open homes—yet clearance rates linger at just 46%.
We look ahead to the anticipated 0.25% RBA rate cut on May 20 and explore ongoing rental market strength, signs of stagflation, and political pressures influencing housing policy. Plus, we discuss growing concerns around personal banking privacy after a controversial move by the Commonwealth Bank.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
All down, all silent, going, going, going, go on son.
Speaker 2:Congratulations. Welcome to the Current Market Insights podcast brought to you by Harris Partners Real Estate. Each episode, we chat with real estate author and industry leader, peter O'Malley, to discuss the current property market conditions and provide insights to assist you on your property journey.
Speaker 3:Hello and welcome to another edition of Current Market Insights with you, your host, kieran O'Brien, and, as always, my good friend Mr Peter O'Malley. Peter, hello, hi, kieran, great to see you. Great to see you again, my friend. Let's jump in this week and really just hit the ground running with a bit of a chat about what has been happening, now that we're pretty well into May. We talked about in a recent episode just how challenging April was in terms of all of the long weekends and the school holidays and the combination of things that made it challenging from a retail perspective in general, but also very much from a property and disruption perspective. Very much from a property and disruption perspective. But now that we've had a couple of weeks into May and you've had a chance and buyers and sellers have had a chance really to get their feet back on the ground, I'd love to get your view and your insights into what's actually happening and how, if at all, the market has shifted in that two-week period.
Speaker 1:G'day Kieran. Yeah, look, activity levels did rise on the weekend. So Saturday May 10 was the first sort of clean weekend the market had experienced, remarkably, since Saturday April 12. So it was definitely a period of disruption and there were reasons aplenty why the market wasn't operating on all cylinders. So we did see increased open house inspections from buyers. The rental market is systemically strong.
Speaker 1:As previously discussed, the auction clearance rate didn't really do much better. That still pulled up at 46% for the last week on SQM researchers' numbers. So there's more transactions happening and I think there will be more transactions happening. But there's no doubt about it that the market is going to wait for the actual rate cut rather than assume it's coming. And there was some data today. The wage price index was probably not as good a number as everyone would have liked it to be. So there is a sense that a 0.5% rate cut is probably off the table now and that the RBA probably has more of a case for sitting on their hands next Tuesday than what they did. But all in all, every arrow is pointing toward a 0.25% rate cut next Tuesday on May 20.
Speaker 3:Okay, so yeah for our listeners.
Speaker 3:Obviously, the RBA Next meets in just under a week's time from when we're recording and we said last time, obviously, that 0.5 wasn't outside the realms of possibility.
Speaker 3:But now, as you're saying, there are some other numbers and some data coming in that suggests that may not be the case, given that the auction clearance rate didn't shift too much I think it might have been 44% or so 46 odd percent in the week just gone I'd love to get some sense of. Firstly, one of the interesting things from last time we talked about the auction clearance rate was the disruptive series of weekends in the election. How much of things had shifted a lot of the auction activity from weekends to midweek, which was unusual. And I wonder has that corrected itself? And, if not, is that potentially still a contributing factor to what's happening with the low rate or are there still other concerns? Obviously, you mentioned people are waiting for a rate cut, whatever that may be, but do you think that's the primary motivator for why there's still not as much decisive activity in buyers when they're looking at property on the week?
Speaker 1:So look, when we look at the breakdown of the auctions, there were 688 auctions last Saturday and 202 midweek last week here and for a total of 890 auctions. So the number of auctions was up, there's no doubt about that. But there was a reversion, if you like, back to Saturday auctions, where the previous three weeks, as we highlighted last week, we'd seen more midweek auctions and an increase in midweek auctions than we normally saw. So the clearance rate for the Saturday auctions was 45.2%. The midweek auctions was 49%, interestingly giving us an overall clearance rate of 46.1%. Sold prior 197. Sold under the hammer 213. 125 rescheduled and 26 sold afterwards.
Speaker 1:How is the market behaving? I still think agents are putting too much stock to auction. That's not, um, you know, which is not appropriate. It's not the sort of product that's going to draw multiple bidders in. Um, there's the odd auction that outperforms, but it is very much a uh case of the exception rather than the rule. And, um, you know, we had some staff out there looking at some auctions on the weekend and they were sort of one buyer, one vendor auctions, where the buyer would make a bid, the vendor would exercise their vendor bid, then they'd have a little negotiation on the side, then the auctioneer would turn around and call the property closed. So certainly hardly dynamic, but people are out there buying and vendors are clearly out there meeting the market to get a sale. I actually don't think there's anything wrong with prices.
Speaker 3:I just think that agents on the whole are probably using an aggressive sales strategy, being a public auction, um, when they should be trying to thread the eye of the needle a little bit more by doing a negotiated transaction which tracks with a lot of what you've really said on the podcast and in your own kind of material for a very long time, which is you choose your sale type for your market, for your property, for your conditions, et cetera.
Speaker 3:Given that we're expecting a rate cut next week it's priced in already Do you expect that that will be enough? If it's a 0.25, do you expect that that will be enough of a motiv's a 0.25,? Do you expect that that will be enough ofa motivator or an impetus on the selling side to bring a range of people to market that have not yet done so? And do you think that? You know, I expect that it would increase some buyer activity because people are feeling more confident, but do you think it's likely to actually encourage anyone to come and sell, knowing that, hey, we might actually see a surge in buyer activity at the moment? Or do you think that the people selling at the moment really are just the kind of the numbers that you would expect to see heading into winter selling in Sydney?
Speaker 1:Stock levels might be slightly up on their seasonal norm just because April was essentially a wipe, given all of those holidays. April was essentially a wipe, given all of those holidays. I don't think vendors will rush their property to market after the back of this rate cut, because it takes six to eight weeks for the impact of a rate cut to hit the economy. That's probably the first point. The second point interest rates are still well above the historical lows of COVID. Interest rates are still well above their historical lows of COVID. So even if and when the RBA do reduce interest rates next week, they've still got the economy on a restrictive setting. So there's no. Someone said the other day they'll cut interest rates to stimulate the economy in the market and it's like there's nothing stimulatory about one rate cut next week economy and the market. There's nothing stimulatory about one rate cut next week. It's more supporting the economy at large and maybe the property market a little bit in terms of giving some relief to people that are struggling.
Speaker 3:Yeah, look, which makes sense, and again, we have talked about that that keeping rates on hold for as long as they have was certainly counterproductive and very punishing to a lot of people. I know, you know, in my circumstance, in a period where rates have been effectively on hold at a high level, we have seen a massive increase in strata levies, which we have talked about on the podcast before an increase in strata insurance. You know, in our place in particular, it seems like we're in a period where everything's getting more expensive. We've got tariff wars going on all over the globe. We have, you know, trade wars that are just we've got real wars. I mean, it's a really kind of turbulent time. A rate cut really is just to help people not sink at this point, and you know we certainly all welcome it.
Speaker 3:Speaking about or raising the topic of tariffs and what's been happening overseas, we talked a few weeks ago about just what that was kind of doing to money markets and what it might do. The biggest battle, the kind of US-China battle, seems to have paused somewhat for a three-month period. Do you think that that's likely to do anything to instill a little bit of local confidence in money markets here? And you know, therefore just kind of provide a little bit of economic certainty, or do you think it's really not a bit of a flash in the pan and it's still not going to have a great impact?
Speaker 1:Oh, I don't think it's going to have a great impact. It's obvious that Trump is using these extreme positions as a negotiating tool. The Chinese publicly anyway didn't respond very much, but they've got together over the weekend, just gone and claimed to have nutted out a 90 day deal for the time being and looking to get on the same page. And you know, from America's perspective, I saw some of the things that the Trump administration were looking for were quite good. You know they wanted China to shut their fake Apple and Nike stores, for example, and clamping down on counterfeit of American labels if they wanted to maintain American brands manufacturing from China. So that's all good stuff and that's all fair. And China, understandably, are looking for their own concessions in the tech sector. So I think that is something that's playing out in the media and it might damage consumer sentiment, but I don't think it's fundamentally the cause of the damage to the economy.
Speaker 1:From the RBA's perspective, we've spoken in the past about stagflation stagflation. For those that are not completely attuned to it, it's essentially around basic terms where the economy is weakening, unemployment is fragile, but inflation is still so high that the Reserve Bank of the day can't cut rates to rescue the faltering economy, and I won't say that there's stagflation in Australia, but it is something that you can sort of see out there, where you get these numbers that suggest maybe rate cuts are not going to be as easy as we first thought. Mark Burris during the week, for example, said that he believes the RBA will cut once next Tuesday by 0.25%, but that'll be it for the rest of the year. I hope he's wrong, we all hope he's wrong. He probably hopes he's wrong too, but that's his view on it.
Speaker 1:So he sees a scenario where the RBA just can't go on a rate cutting expedition because they could set inflation running again. So they need to keep interest rates at a level that suppresses or restricts the economy, as the RBA says that it's consciously doing. So the reason that stagflation is so dangerous is that the solution for stagflation is much harder to identify than rampant inflation or deflation. If you've got too much deflation, just cut interest rates to get people spending again, and if you've got too much inflation, dollar rates up to slow things down, which is what the RBA did. But we're at this point, this inflection point, now, where the economy is under pressure and there are some numbers coming through, like the wage price index that we just discussed. That you wouldn't call employment environment overly strong, but it's still going up at an uncomfortable rate relative to where everyone would like it to be.
Speaker 3:I know we promised not to bring politics into this episode and we will just very briefly touch on it, but given we talked about the Albanese government kind of win and what that may mean from a mandate perspective, and given that he's made a lot of promises around spending housing supply you know, free money for students and tax cuts and all those kinds of things is there any risk in your opinion that Labor getting that mandate and potentially just acting with haste to bring all this to fruition may actually drive inflation at a kind of base level, given that infrastructure spending does contribute some components to all of it? Tax cuts in theory could contribute to some extra money theoretically to boost house prices. There's a range of factors that could be considered. I mean taking 20% off student HECS, for example, increases borrowing power. There's a whole range of things that may flow on from this. Do you think that there is a risk that that re-election with such kind of force could be pro-inflationary for us and in fact a bit of a negative?
Speaker 1:thing. That'll be up to Treasury and Jim Chalmers to manage all of that. But the answer to your question is yes, it could be. So. The one that hasn't been discussed is rental inflation. Yeah, rental inflation is the rental market's rising at a time where it's normally slowing coming into winter. Yeah, so we had a property during the week where it was a new rental listing to the market. A lot of agents told the owner to expect somewhere around $950 to $1,000, and it went for $1,300 a week. Wow, yeah, so rental inflation is real and that is a fairly significant component of the CPI basket. So that could feed into inflation in time. And the reason I talk about the rental market not because we're real estate agents, but because you've asked the question on inflation and the government do not have anywhere near enough dwellings to come into market that are being built. They've introduced at a state government level legislation that's driving existing investors out of the market and their immigration policy is far too loose.
Speaker 3:Yeah, well, it seems like, particularly in a potentially stagflationary period, that the great risk we have, as you say, is that wages are increasing and it's challenging to manage, especially in small business at a time when interest rates are high. So the cost to borrow and grow the business is challenging. You've got, you know, potential government overall rapid spending. It feels like we're at a bit of a, as you say, an inflection point where this could all go very wrong very quickly. And I know, firstly, I can't be alone in thinking that we don't want a period where inflation then runs away again and we end up having to go incredibly aggressive to catch it back, because I think that would do incredible damage to people just recovering after such a long period of high rates and cash kind of restrictions. And I literally feel like you're clawing through it sometimes.
Speaker 1:If inflation were to rise, which would force the RBA to increase rates again, that is the sort of event that would savagely turn on the Albanese government and make what is essentially already an unlosable election in 2028, a knife edge decision.
Speaker 1:So, as we discussed last week, if the Albanese government are sensible from here, they'll win the next election and should be able to hold on the one after, at the very least, or potentially. But if they say we've got a mandate to do what we want to do and start pushing through inflationary measures and keep immigration where it's at and can't get these new dwellings to market that they've promised, you could find a scenario down the track where the rba don't have any choice but but to deal with the numbers that they're given. And that's probably why they'll be cautious until they you know they get a little bit further down the track and see that, yes, they've got inflation back in the target band, yes, they can cut interest rates next week, um, but they will want to see that what they're looking for, um in the economy is being supported by the government through policy.
Speaker 3:Yeah, it makes sense. It certainly. I know we're both politically interested. So it will be for me, anyways, certainly a period to look and, I guess, enjoy a repeat government at an age where I can truly appreciate it, because the last time, you know, some years ago, with Howard, I was maybe a little bit young or naive to truly understand. So it is for me an interesting period ahead. What the mandate that the Labor- yeah, it's just such an overwhelming kind of opportunity really to create.
Speaker 3:I've always said that the one thing that annoys me about federal politics in Australia is three-year terms. I feel like three years is hardly enough time to, you know, bludgeon ministers into a portfolio, let alone make meaningful, well-reasoned decisions. And I, you know, I always think it would be great if you could have government of either side at least have an opportunity to build momentum on social change right, three-year terms are too short.
Speaker 1:I agree, it's tough.
Speaker 3:So this, you know, this is the first one I can truly appreciate really, where they have an opportunity to potentially keep the same leader and keep the same platform and drive forward, you know, in the ilk of Howard and those before him, uh, to to actually make some sustainable change for for, whether you approve the change or not, Reform?
Speaker 1:yeah Look, uh it's. It's an interesting one and we'll only see what they do as time unfolds. Howard controlled both houses in his last term and he was looking to be a reformist with that mandate that he had and he overstepped the mark on work choices and paid the price for it. And that's the key now for the existing government is to be reformists that benefit at least 50.1% of the country and allow them to be re-elected, but not be so reformist that they suddenly alienate a large section of the country and the electorate to the degree that they get voted out.
Speaker 3:Yeah, look, great recap, pete. Before we end up today, I just want to pivot briefly to. We often reference SQM research as what we believe is the best source of truth on real estate statistics. It's a, you know, unbiased, impartial kind of house, and the man in charge of that, louis Christopher, is a well-respected analyst published just recently. That involved Louis, where he was talking about how, as a consumer of the Commonwealth Bank, they sent him a form requesting some information about his financial status. Where did you get your money from? How did you earn it? What do you plan to spend it on All that kind of thing.
Speaker 3:And then you made me aware of another possible incident involving someone trying to get their money and having questions asked of them and then ultimately being denied their own cash from a bank because they couldn't give adequate answers. Now, I know this is not real estate related, but given that you know Louis is a friend of yours and a friend of the show, I would love to get your thoughts on this To me. It's such a shocking and really intrusive and I don't know. I feel like unexpected thing to happen, and I guess my first question is do we all just take for granted that banks are looking after our assets and, you know, will allow us to do what we need in, you know, in the long run. Or, you know, is that a naive view I have from when I, you know, got a Dolomites account in primary?
Speaker 1:school. Yeah, no, it's definitely a naive perspective, with respect, yeah, so I like the American finance writer, jim Rickards. He says that if you think your money in the bank is your money, you're sadly mistaken. I don't like that, and it's the bank's money and they'll decide whether they give it back to you or not.
Speaker 2:Yeah.
Speaker 1:And if you think that that is an extreme position, take $50,000 into your local bank in cash on Monday and deposit it, and they'll be all smiles.
Speaker 1:Go back on Friday and say I'd like to withdraw $50,000 in cash from my bank account and you'll be subjected to the third degree. So there is just but one example of your money going into the bank becomes the bank's money and they'll decide if and when they give it back to you. So all banks will hide behind AUSTRAC, the government agency. So I've just got the letter here. It reads Dear Louis, we wrote to you on April 4, 2025 requesting updated personal information. However, we have not received this information and or documentation. If you have recently responded to our earlier request, then please ignore this message. Why update my details?
Speaker 1:All banks and financial institutions operating in Australia are required by law to adhere to the same know your customer requirements, kyc, which includes ensuring that customers personal details are up to date that's fine and understanding their source of funds and source of wealth and other required information. Further information you will need to provide information and or documentation including, but not limited to, the following details relating to your source of funds, details relating to your source of wealth, confirmation of your birthday, confirmation of your current occupation and or employment, and recollection of your identification documents. Specifically, we may they go on to say in the letter specifically, we may remove your ability to use and access your account and or accounts you operate. Remove your ability to use any linked cards, including ATMs. Remove your ability to view and access your account and accounts you operate on NetBank, combiz and the ComBank app, and stop any scheduled transactions, direct debits, direct credits and or regular payments if you don't cooperate. That is Australian banking in 2025. Banking in 2025?
Speaker 3:There's a part of me that says, okay, that's in some ways a little bit reasonable. Right, austrac, they have an obligation or their directive is to stop money laundering and criminal activity and all that kind of thing. And there would be certainly part of me that says, good, okay, that's a great thing to do. We've talked before about how one of the concerns with foreign investment, for example, is that there might be money laundering and there's issues over some purchases in Sydney in the past, et cetera, and where those funds have come from. And I certainly get in that perspective.
Speaker 3:But I wonder, just thinking about when I was younger, there was talk that bikey gangs used to launder money through poker machines, for example. Right, they'd go in and they'd get the money out. What's the scenario? Let's say you and I decide after work we're going to go down to the club and we're going to have a bit of tea and we're going to play the machines and we win $50,000, just like your example. Now, if we put that in the bank, we can theoretically get asked these questions, but there's no way for us to prove how we got that money right. I mean, it just seems like for the average person, this is a completely unnecessary intrusion into not only information that is completely irrelevant. The bank should just be holding it to keep the money safe, because that's the kind of standard we live in as a social construct. But it seems ridiculous to me that they can, without seemingly any cause, send a letter and if you don't comply, just say well, that's it, you can't get any access to your funds anymore. Too bad.
Speaker 1:Uh, debanking them, but also controlling consumers' behaviors and using the banks as as a overlord on, on, uh, you know, as a conduit to control members of the public. If you want to catch more criminals, hire more police.
Speaker 3:I get that there's a part of me that thinks too do you reckon there's any influence from organizations like the ATO that are trying to catch people that are dodging tax or trying to do other things, as opposed to using Austrac as the blanket, and then, in fact, they're just trying to revenue raise and catch some people who are perhaps doing cash jobs on the side, or you know?
Speaker 1:is this, uh, it's just big brother and it's just classic overreach.
Speaker 3:It feels exactly what I was about to use. It feels like a massive overreach, completely, and I guess the other question, and Louis won't be the only one.
Speaker 1:He's just put it on social media. If you reckon it's not an issue. I think I saw it this morning because I showed it to a client. He put his original post up explaining what had happened to him, and on social media, on X. I don't know how many people looked at it on Facebook, but on Twitter, when I was with a client three hours ago, 467,000 people had viewed it. 467,000 people had viewed it. Now it's up as we speak, 3-4 hours later. 528,000 people have read this post. Wow, this won't wash with the public. This is BS.
Speaker 3:Look, we've had a Banking Royal Commission For unrelated things, and this just feels like Another. You know why private Organisations can hold our things hostage, gain access to information that they don't need or have any real kind of uh, I guess justification to know my. My other concern, then, is you know if I give this to the bank let's say, a bank with Commonwealth or whatever whoever it is is not relevant in this case, but if I give them all this information, am I you know who's to know what subsidiaries they own that then get access to some of that? Does it go out to other? You know third parties to sell me different products based on the income band I'm in or the like I? I personally worry about my own.
Speaker 1:We live in a democracy. This is the sort of stuff you read about in China. At what point um do you have to tell an organization how you built up your wealth and how you got the money that you've got in your bank account?
Speaker 1:yeah if a crime has been committed by anyone who's got too much money in their bank account, it's up to law enforcement to do so. This capture all um, big brother, uh, overreach that. The you know, if, this, if, if, if, if Louie's getting it, clearly others have got it and haven't sort of made a big point of it, but we're all likely to, to, to, to, to be a victim of this sort of behavior and then and then followed up not just asking for the information, but, you know, real, genuine threats against the man. Remove your ability to use and access your accounts and or accounts you operate. Remove your ability to use any linked credit card.
Speaker 3:Yeah, and you would know for sure that if something were to happen and Louis couldn't conduct business or do whatever and incurred losses, the bank would be completely invulnerable to any kind of recourse. Right, they'd be protected. There's nothing he could do. Yeah, yeah, unbelievable. Look, let's just hope that in those they'd be protected. There's nothing he could do. Yeah, yeah, unbelievable, I look, let's just hope that in those 500 and something odd thousand that have looked at that, that the treasurer and the minister for finance have seen that and maybe might think about what. You know. We've had so many issues with the banks in this country over the years. Let's hope that we you know we don't continue to perpetuate those.
Speaker 1:That you look at what's going on in China, for example, facial recognition walking down the street and you know social credits and all of these sorts of things. This is a version of social credits.
Speaker 3:Yeah, yeah. When did the banks become the arbiters?
Speaker 1:It's a soft version. If the public just roll over on this, well, they're just going to keep going. Do you know what I mean? The public were complicit and complied during COVID to their own detriment. And then now we're moving to this here where the bank is saying tell us all about how you got this money in your account and we basically will effectively shut you down and say you're inoperable. And if you want any example of why we must continue using cash to some degree in the real economy to keep it going, this is it, because once they've herded us all into digital money, we're all at the mercy of this sort of behavior oh, look we are.
Speaker 3:it's a very slippery slope from 2025 straight into 1984, that's for sure. I I know I love my local bank branch and if anyone you know, I live in Homebush. The Homebush Community Bank is a branch with cash and people and that's one of the reasons, you know, I love the fact that I can go and talk to them and do things. That's not a real plug for them, but you know, you get the idea. Especially aging population. You know our parents, our, like older family members they don't want to try and, you know, rapidly enter the digital age.
Speaker 3:You, at the same time, this is happening. You read in the, you know in the paper, online scams are through the roof online because we've got a vulnerable population that don't understand the digital and the tech space particularly well, and that's, as you say, all the more reason why we need to be really firm on this and I certainly hope that. You know, if nothing else, this raises a bit of I hadn't really even heard of this happening, so I certainly hope it gets a bit more traction and you know the government does something about this and steps in, or we, the people, do.
Speaker 1:Well, the government are not going to do something about this, because they're the ones who implemented it.
Speaker 3:What they need to know is that they have hit a raw nerve with overreach here and the public knows what they're up to and they won't cop it. Yeah yeah, it's 2025's feeling, that kind of year, peter, we all need to mobilize. Really, look really interesting chat today. I'm glad we sounded off on some of these topics. As always, it's great to have you in talking through and learning from your experience. Good on you, kieran, thank you, thanks, peter, and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 2:Thanks for joining us on the Current Market Insights podcast brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
