Australian Housing Prices Forecast To Rise 20 Per Cent
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Australian Housing Prices Forecast To Rise 20 Per Cent

One of Australia’s leading economists predicts the early makings of a property boom.

By Terry Christodoulou
Tue, Feb 23, 2021 6:16amGrey Clock < 1 min

One of Australia’s big four banks is forecasting 20 per cent gains in the housing market over the next two years.

The incredible figure comes out of Westpac’s first Housing Pulse report for 2021 and indicates Australian dwelling prices could be on the brink of a boom.

The banking institution’s chief economist Bill Evans stated in the report, released on Monday, that he was expecting dwelling prices to lift 10 per cent nationally in the next 12 months, with that pace continuing into 2022, citing strong economic growth as the cause.

“The upturn is being supported by record low-interest rates; the confident expectation among borrowers that these rates will remain low for years to come; ample credit supply; and an improving economic backdrop,” Evans said.

In the final quarter of 2020, dwelling approvals surged 22 per cent while lending for dwellings lifted by 16 per cent in the December quarter.

Smaller capital cities and regional towns were likely to capitalise on the forecast increases, however concerns linger around the Sydney and Melbourne high rise markets.

Further, Evans has foreshadowed good news for the labour markets with unemployment rates forecast to decline steadily to 6 per cent by end of 2021, and 5.3 per cent by the end of 2022.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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