Aussie Home Loans founder reveals why house prices will go up in 2024

Aussie Home Loans founder John Symond predicts house prices will start rising again in 2024 as interest rates go back down, as he slammed the Reserve Bank boss for being a failure – and claimed baby boomers had it much easier than today’s borrowers.

The RBA’s latest quarter of a percentage point increase has taken the cash rate to a new 10-year high of 3.35 per cent – with Governor Philip Lowe signalling further increases in coming months.

Three of Australia’s Big Four banks – Commonwealth, Westpac and ANZ – are now expecting the RBA to raise rates two more times to a new 11-year high of 3.85 per cent.

But Mr Symond, who founded Aussie in 1992, said the RBA would be forced to cut rates in 2024 to ward off a steep economic downturn, and that would cause house prices to rise again like they did in 2021 and early 2022.

‘I’m confident that this time next year, house prices will be stronger than they are now,’ he told Daily Mail Australia.

Aussie Home Loans founder John Symond (pictured right with wife Amber) predicts house prices will recover again in 2024 when the Reserve Bank is forced to cut interest rates

Mr Symond said the lead-up to rate cuts at the end of 2024 would be a signal to buyers to get back into the market.

‘Once they start coming off again, which probably will be towards the end of next year, mid to the end of next year and you see rates edging down by half a per cent, that will be a signal to home owners “we’ve got to have a hard look at this”,’ he said.

The Commonwealth Bank is expecting the RBA to cut rates by 0.5 percentage points in the December quarter of 2023, followed by two more rate cuts by the end of June 2024. 

Mr Symond did not expect such a rapid reversal, and thought rate declines would not occur until late 2024 when the current rate squeeze would have caused a sharp drop in consumer spending, going close to triggering a recession.

‘If they continue going up over the next six months, they are taking that risk,’ he said.

‘I disagree with the governor when he said that interest rate rises aren’t felt straight away – Australia unlike Europe and the US, we’re a very, very, very housing-centric country and as soon as there’s an interest rate rise, it’s felt immediately.’

Just as rate rises hit Sydney and Melbourne first, Mr Symond said future rate reductions would also prompt a rapid re-investment in housing, with consequent price increases.

Upmarket suburbs near the water in interest-rate sensitive markets like Sydney would be likely to bounce back first, like they did in late 2020 when rates were cut to a record-low of 0.1 per cent.

‘The upper areas of anywhere near water, they will be more resilient in my opinion than other suburbs,’ Mr Symond said.

Upmarket suburbs near the water in interest-rate sensitive markets like Sydney would be likely to bounce back first, like they did in late 2020 when rates were cut to a record-low of 0.1 per cent (pictured are homes at Point Piper in the eastern suburbs)

Mr Symond, who pioneered non-bank lending three decades ago, predicted that when rates were cut in 2024, bank variable rates would drop by less than the RBA cash rate easing – as occurred in late 2008 during the Global Financial Crisis.

‘Interest rates, when they start dropping, you might find some of the banks might not drop the whole Reserve Bank amount,’ he said.

That’s because the banks and non-bank lenders source about 40 per cent of their funding from global money markets instead of from the Reserve Bank of Australia.

The banks’ global borrowing costs could mean they will likely be stingy in passing on the full rate reductions to mortgage holders.

But he said the banks would be unlikely to raise variable rates through 2023 in excess of RBA moves, regardless of what their borrowing costs might be.

‘In this environment when interest rates have gone up so sharply, in such a short period of time, the banks would not be game enough – they’d get slaughtered both media and from customers,’ Mr Symond said.

When it came to the performance of the Reserve Bank, Mr Symond was scathing of Dr Lowe for promising in 2021 rates would stay on hold until 2024 only to have since raised them nine times.

‘The guy obviously knows his stuff but in this particular aspect of his job, it’s very unfortunate that this aspect is a very, very big and sensitive area of his role, he got it so wrong,’ he said.

‘On that, you’d have to mark him as a fail.’

Inflation last year surged by a 32-year high pace of 7.8 per cent, a level more than double the RBA’s 2 to 3 per cent target, which Mr Symond said made rate cuts unlikely in 2023.

‘I’d be more confident rates will come off during 2024, maybe mid to later, than I am this year,’ he said.

When it came to the performance of the Reserve Bank, Mr Symond was scathing of Reserve Bank of Australia Governor Philip Lowe (pictured outside his Randwick house in Sydney) for promising in 2021 rates would stay on hold until 2024 only to have since raised them nine times

The man who fronted Aussie Home Loans TV commercials during the 1990s also had a message for older Australians saying they did it tougher than young borrowers today, with interest rates hitting 17.5 per cent 33 years ago.

The entrepreneur, who paid 21 per cent interest on his mortgage, said that those ‘boomers’ were able to buy houses at much lower prices as a percentage of average income.

‘The ’87 stock market crash caused a lot of pain for five or six years but take that away, baby boomers had it pretty good,’ he said.

‘Housing was more affordable, baby boomers didn’t have to go to war – there was some conscription but the percentage of baby boomers who went to Vietnam is very tiny and I think the baby boomers’ era was a golden era.

‘I remember when I was a young articled clerk in law, the average price of a house in the seventies was around 50 grand – when I say it was easier, less people got home loans then because money wasn’t a commodity like it is today where banks are borrowing offshore against their balance sheets.’

In November 1992, Sydney’s median house price of $220,628 was dear but an average, full-time worker on $30,966 with a 20 per cent deposit owed the bank 5.7 times their annual salary.

Little more than three decades later, Sydney’s mid-point house price of $1,205,618 is so expensive an average, full-time worker on $92,030, with a deposit, would have a dangerous debt-to-income ratio of 10.5.

That also followed a 15 per cent plunge in the year to January which barely unwound the 27.7 per cent surge during the pandemic, CoreLogic data showed. 

The Australian Prudential Regulation Authority considers anyone owing more than six times their annual salary as over-committed.

Mr Symond sold the remainder of his stake in Aussie to the Commonwealth Bank in 2017, 25 years after being the head of Australia’s first non-bank lender.

Financial deregulation allowed lenders to source funding from overseas instead of having to rely on customer deposits to finance home borrowing.