Matthew Hassan is a senior economist with Westpac and is instrumental in utilising his expertise across housing markets and the Australian consumer sector to shape Westpac’s views on Australia’s economy.
Matthew is the author of Westpac’s monthly Westpac Housing Pulse report, as well as the Red Book report, regarded as essential reading on the consumer sector.
In this week’s podcast episode of Property Insights with Mark Bouris, Matthew discusses the Australian property market, including factors contributing to the increase in property prices, an analysis of different housing markets, and Westpac’s position on the rate cycle. He also highlights the challenges of the supply and demand balance in the market and the impact of government policies.
Key Takeaways:
- ‘Uncanny rally’ – Matthew considers the unsettling trends in price growth as the national property market continues to defy logic in the face of RBA rate hikes. He and Mark discuss population growth, near record low market supply, and unencumbered purchases as possible market drivers.
- ‘It’s clearly Perth’ – Housing markets are not uniform so Matthew highlights the importance of identifying what’s behind market cycles to gain a clear picture of upcoming markets. Mark and Matthew identify Perth as the next market given that it hasn’t had a decent price cycle recently and shows greater headroom around affordability along with a positive state economy.
- After that? The Eastern states will respond to the tight affordability and, while behavioural shifts will drive the migration flow for the next cycle, it’s still unclear where is next.
- Westpac’s position on rates? – “We think the hold will carry through to the third quarter next year, then a series of rate cuts.” The RBA will hold position until they see inflation truly back towards target, no wage breakout issue or other low productivity drive in play, and unit labour costs settled.
- “On our current forecasts it looks like they’re going to achieve a relatively soft landing in returning inflation to target – all things considered that’s a pretty good result.” Mark and Matthew predict we’ll likely see a less restrictive policy setting and 2-3 rate reductions starting at the end of 2024 if the RBA can maintain a flexible mindset.
- “It’s a real challenge over the medium term.” – Matthew highlights the concern over the imbalance between physical supply and demand in the housing market. We’re experiencing the biggest gap between population inflows and new building since the troops returned from World War 2, and that’s going to hit first home buyers and renters.