Big bank’s huge rates call amid property confidence spike

RBA Governor Michele Bullock is expected to cut rates. Picture: NewsWire / Nikki Short

Aussies have had a massive upswing in property confidence after three quarters of falls the latest survey found, as one of Australia’s biggest banks tips a return to pandemic era rates.

The NAB Residential Property Index, released Friday, surged to ‘well above average +40 in March, after moving lower in the previous three quarters” – with the expectation that it will hit 51 in the next 12 months and 54 in two years.

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NAB Residential Property Index. Source: NAB

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NAB executive chief economist Sally Auld expects easing interest rates to support growth and the economy to have a “soft landing” with inflation settling around the middle of the RBA’s target band by the second half of this year and unemployment staying below 4.5pc.

“That said, there are building cross winds in the global economy and weaker global growth is likely to be a negative for Australian growth and also disinflationary. That means, the RBA will need to normalise rates more quickly and potentially ease rates further to provide some additional support. Therefore, we now see the RBA cutting to 3.1pc by August and then taking the cash rate to 2.6pc by early-2026.”

The cash rate target was last at 2.6pc in October 2022 – which was at the tail end of pandemic lockdowns.

NAB Residential Property Index: States. Source: NAB

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NAB head of home lending Denton Pugh said “house prices are on the rise again, with the market picking up across most of the country over the March quarter”.

“The NAB Residential Property Index rose to +40, showing that people are feeling much more positive about the housing market,” he said.

“With the Reserve Bank cutting interest rates in February, we’re seeing lending activity pick up across the board encouraged by improved conditions and lower interest rates.”

“We expect more buyers to return to the market throughout 2025 and prices to continue their modest gains into the winter months – especially in capital cities where homes are still in short supply.”

Property Clock Q1 2025. Source: NAB

Mr Pugh said housing affordability and supply were long-term challenges that needed long-term solutions.

“It’s encouraging to see governments prioritise housing, but there’s still a long way to go,” Mr Pugh said. “There’s no simple fix, solving Australia’s housing challenges will take collaboration across the board.”

“Business, government, and community groups need to work together to create more opportunities for Australians to find affordable homes.”

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