House Prices To Slow Before Falling: ANZ | Kanebridge News
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House Prices To Slow Before Falling: ANZ

The bank is forecasting housing growth to ease in the next two years.

By Kanebridge News
Thu, Nov 18, 2021 4:28pmGrey Clock < 1 min

House price growth is expected to peak before the end of 2021 before moderating to 6% nationally in 2022 and falling by 4% in 2023, according to the ANZ.

Nationally, the housing boom of 2021 is expected to lift prices to above 21% by the end of the year. Sydney will reach a peak of 27% — the strongest growth since the late-1980s boom.

However, according to the ANZ’s senior economists Felicity Emmett and Adelaide Timbrell a slowdown is in sight.

“With tighter credit, rising fixed mortgage rates and a large increase in stock on the market combined with decreased affordability all set to dampen price growth in 2022,” they wrote in the latest housing market research.

Capital city prices overall are expected to lift by a further 6% in 2022 as the post-pandemic boom eases.

According to the ANZ’s outlook, the strongest gains will be made in Brisbane (9%), Hobart (8%) and Melbourne (7%). Sydney’s long and steep surge will flatten to 6% next year.

“While affordability constraints and a better supply-demand balance will help slow the market, the path of interest rates will be critical to developments in the housing sector,” the ANZ team wrote.

The ANZ analysts expect the Reserve Bank of Australia to leave the cash rate on hold – it is currently at 0.1 per cent – until the first half of 2023.

By the end of 2023 the forecast prices nationally are expected to have fallen by 4%. Sydney is expected to feel a 4% drop while Melbourne, 2%.

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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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