In late 2021, a new and highly transmissible variant of COVID-19 was discovered. Called Omicron, it has since caused a surge in the number of infections not just in Australia but also worldwide. Many were again forced into isolation, disrupting the supply chain.
While the impact of Omicron in the health industry becomes clearer and as health workers seek to learn more about this variant, many economists and analysts in the property industry are also continuously assessing its impact to the industry and economy in general. In this blog, we keep you up to date about what we know so far and what to expect regarding the impact of Omicron.
Omicron to affect inflation and interest rates
COVID-19's short-and long-term inflationary impact is still highly unpredictable for the Reserve Bank of Australia (RBA) at this time, as thousands of workers are again pushed into isolation and businesses struggle to maintain normal operations because of the Omicron variant.
However, the shortages of workers and supplies are already anticipated to put increasing pressure on prices. In turn, this could push the RBA to consider raising interest rates sooner than expected, according to economists.
Local inflation figures for the last quarter will be released on January 25 and are expected to provide new evidence of the economy's price pressures. These local statistics, according to Bank of Queensland chief economist Peter Munckton, will show how much global price increases are being duplicated in Australia. For context, the Federal Reserve of the United States has already accelerated its rate hike schedule and rate hikes are expected to start in March, according to Fed watchers.
Munckton predicted that Australian rates will rise as the cash market is likely to be impacted by a combination of strong demand and supply shortages. Worker shortages will also continue to be a problem. Practically, if inflation is near the top end of the goal zone of 2-3 percent and wage growth is approaching 3%, this may be enough for the RBA to raise interest rates. He added that most economists have the same prediction and are seeing a rate change during the first half of 2023.
ANZ economist David Plank backed this up saying he expects the RBA to raise interest rates in the first half of 2023 with the spread of omicron adding pressure on prices in the first quarter of 2022.
What to expect: if the economists are right, loan interest rates are likely to increase in the first half of 2022. If you’re planning to get a loan anytime soon, contact your expert brokers for more insights on this matter.
Property prices set to increase
Realestate.com.au executive manager economic research Cameron Kusher predicted that despite the surge of number of cases due to Omicron, it would still be “business as usual” for Australia’s property industry. Meaning, the property prices will just continue to rise like what we’ve seen in the past months.
He added that while the Omicron left most businesses in a vulnerable position, it could actually make people start to think that they need to save up and invest on property instead.
Mortgage Choice CEO Susan Mitchell also said that if we were to study the previous lockdowns caused by surge in the number of cases, there certainly is a greater push for people to save up on money. She claimed that because people couldn't spend on vacations or other lifestyle events during periods of lockdown in 2021, a large proportion of mortgage holders either saved additional money in their offset accounts or moved ahead on loan repayments.
With these, the property prices are expected to continue to rise but a bit slower from where they were last year.
Can’t wrap your head around these? Fastgrow Finance can help
Are you planning on getting a loan to buy a new home? These news can definitely have an impact on you. But don’t worry, we at Fastgrow Finance are here to help you navigate all these so you can achieve your goal.
At Fastgrow Finance, we understand the property and finance market very well, and we always adapt to whatever changes that may happen – may it be tighter regulations, increasing home prices and interest rates, and more.
We also take a deep dive into our client's goals and situation to provide the best solutions that suit their budget. This makes us one of the trusted mortgage brokers and consultants in Australia.
If you need help with your home loan or any type of loan, feel free to contact us. Our experienced brokers will work with you to find a lender that’s perfect for you.
Contact us through the following channels:
- Phone: (02) 9630 3142
- Email: [email protected]