A leading finance guru has warned that a rising unemployment rate will pose a greater threat to the housing market than fixed mortgage rates.
Australian businessman and Yellow Brick Road chairman Mark Bouris has forecast a fall in house prices as more people lose their jobs and the unemployment rate is expected to hit 4.5 per cent next year.
More than 1.3 million Australian households will have their mortgages readjusted by the end of 2024 as their current fixed-rate mortgages expire.
Mr Bouris believes mortgage holders are doing better than expected despite the Reserve Bank of Australia having made 12 consecutive rate hikes since May 2022.
However, he believes more Australians will be forced to sell their homes as the job market weakens.
Mark Bouris believes Australia’s housing supply will increase “rapidly” as the unemployment rate rises. Pictured is an auction in Melbourne
According to Mark Bouris (pictured), property prices will fall as more and more people lose their jobs.
Australia’s unemployment rate rose to 3.7 percent in July, up 0.2 percent from the previous month and the highest since May 2022.
The rate is expected to be met 4.5 percent over the next year once the effects of rate hikes take hold in the economy.
“If the unemployment rate goes up to 5 percent, we will see that more supply comes into the market while demand stagnates,” Bouris said Australian Financial Report.
“This could result in a reversal of recent price gains.”
Mr Bouris said the number of homes on the market will increase over the next six to nine months.
“I think some people will be forced to sell as their fixed-rate mortgages move to higher interest rates, so we could see more supply over the next six to nine months, but that probably won’t be enough to drive prices down,” he said he.
“But if you couple that with higher unemployment, we’re going to see a fairly rapid increase in supply.”
The Reserve Bank kept interest rates at an 11-year high of 4.1 percent for the third straight month on Tuesday.
Home prices nationwide have risen 4.9 percent since February, according to CoreLogic.
In Sydney, the median rose another 1 percent in July to an even more prohibitive $1,333,985, data from CoreLogic showed.
In other major capitals, property prices started to rise again in March.
Melbourne home prices have risen for five straight months, rising another 0.3 percent to $923,881 in July.
In Brisbane, home prices rose another 1.4 percent to $819,832. Perth’s value rose one percent to $625,969.
Mr Bouris said the number of homes on the market will increase over the next six to nine months
The unemployment rate in Australia is expected to rise to 4.5 percent next year. Pictured are Aussies in front of Centrelink
Adelaide’s recovery began in April, but monthly gains have been larger since then, with prices rising another 1.4 percent in July to $722,793.
Darwin prices rose for the third straight month in July, rising 0.5 percent to $583,913.
“The lack of supply tells me that people don’t have to sell because they still have a job and because they don’t have to sell, higher interest rates haven’t put pressure on prices yet,” Mr Bouris added.
He correctly predicted that the interest rate would remain unchanged on Tuesday after annual inflation fell to 4.9 percent from 5.4 percent in July.
“This is very encouraging,” Mr Bouris told Sunrise on Tuesday.
“That’s one of the lowest numbers we’ve had in a long time.” Good stuff.’
“In terms of timing of a rate cut, I think they’re going to be bugged a bit for a while to make sure they teach us a lesson about not overspending or overpaying and controlling our household spending. “
“Money market generally expects the cut and interest rates to start around July, August, say this time next year.”
“So we expect our current rate for a year and then some relief.”
1.3 million Australian households will see their mortgages readjusted by the end of 2024, forcing some to sell their homes. Pictured are potential home buyers at an auction in Sydney