Things are looking up for the national property market as experts predict house prices could experience a significant boom in the near future according to Westpac’s optimistic property forecast. The nation’s second biggest bank has predicted prices are set to bottom out by June after a 2.3 per cent fall before creeping back up by 15 per cent in 2023.
The bank initially predicted a 10 per cent slump for national housing prices between April 2020 and June 2021 with a slight 8 per cent recovery in store for next year, however Westpac’s chief economist Bill Evans and senior economist Matthew Hassan have improved their expectations.
The forecast now predicts the total fall to be 5 per cent – which is a further 2.3 per cent fall after already declining 2.7 per cent since April – as several capital cities are proving to be more resilient. Perth’s prices are expected to remain the same while Adelaide will actually rise by 2 per cent. However, locked-down Melbourne is expected to have the biggest drop of 12 per cent, followed by 5 per cent in Sydney and 2 per cent in Brisbane.
Westpac’s figures were the most promising compared to its fellow lenders with Commonwealth upgrading its prediction earlier this month from an expected 10 per cent drop to 6 per cent followed by a meek 3 per cent recovery in the second half of next year. Meanwhile, ANZ maintained prices would drop by 10 per cent with 15 per cent being felt in Melbourne.
Economic experts predict prices will reach their lowest in June next year following a surge in urgent or distressed sales after all mortgage deferrals expire in March. Some of this brunt could be felt in the coming weeks as around half of the more than 900,000 deferred loans will be assessed in September and October as they reach the end of the six month stint, according to the Australian Banking Association.
However, the market is expecting to see a 15 per cent surge that will be spread evenly over the two years leading up to mid-2023 with the biggest gains being felt on the east coast with Brisbane expecting a 20 per cent boom. Meanwhile, Perth will see an 18 per cent rise, Sydney with 14 per cent and 10 per cent in Adelaide. Meanwhile, Melbourne will see a 12 per cent increase which will bring the city back to its pre-Covid prices while the other capitals get substantially more expensive.
“On the basis of those increases we would see affordability modestly worse than long-run averages for the nation as a whole, with the advantage enjoyed by the smaller states diminishing,” the report read.
These increases would be aided by possible reduced fixed rates, which are already a more attractive option for borrowers than variable rates, if the Reserve Bank maintains pressure on the yield curve. Meanwhile, the impacts of the recession have also been milder than expected according to Westpac as proved by its update of the end-year unemployment forecast from 8.5 per cent to 7.8 per cent and increased growth forecast for the second half of the year from 2.8 per cent to 4 per cent.
“This recovery will be supported by sustained low rates, which are likely to be even lower than current levels; ongoing support from regulators; substantially improved affordability; sustained fiscal support from both federal and state governments; and a strengthening economic recovery (particularly once a vaccine becomes available, which we expect in 2021),” Evans said.
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