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Opinion

Australia’s biggest bank believes our property markets are on the cusp of a boom

Australia’s biggest bank

Australia’s biggest bank – the CBA – just upgraded its housing market forecast, joining the long line of economists that have done a 180° about-face.

CBA economists think Australia’s housing market is “on the cusp of a boom”, saying that surging momentum in the property market and leading indicators pointed to strong price rises.

They are forecasting that dwelling prices will rise 8% in 2021 and 6% in 2022, with house prices rising 16% in that time and unit prices by 9%, continuing the disparity in these two segments of our property markets.

Australia’s biggest bank

If Sydney and Melbourne home values grow by 12 per cent in the next two years that would mean Sydney’s median price would jump to around $1.2 million, and Melbourne’s would increase to $920,000, an increase of  $160,000 in Sydney and $110,000 in Melbourne.

Of course not all properties will increase at the average rate – some will outperform the averages while others will languish – but that’s how averages work isn’t it?

CBA’s house price forecasts in underpinned by no change in the cash rate for the next two years, which is likely considering the Reserve Bank stated that they were unlikely to change their interest rate for three years.

The main risks to the bank’s forecast property boom were:

  • a significant outbreak of COVID followed by large-scale lockdowns,
  • a hike in interest rates, and
  • the re-introduction of macro-prudential measures to slow the rate of lending.

The bank’s head of Australian economics, Gareth Aird wrote: 

“We do, however, factor in a modest increase in fixed rate mortgages, which will rise if the RBA removes or raises its target yield on the 3 year Australian Government bond, as we expect in the second half of 2021.

At this stage we consider the reintroduction of macro-prudential measures to be a relatively low risk in 2021.

However, if new lending accelerated too quickly, particularly to investors, there is a risk that the Australian Prudential Regulatory Authority (APRA) could reintroduce macro-prudential measures to slow things as they did in 2017.

History shows that prices can rise very quickly when the housing market is on a roll. Indeed it may turn out to be the case that the growth profile for price outcomes over the next two years ends up more front loaded than our current projections.”

What an about-face…

It’s a stunning turnaround from the dire predictions made during the pandemic’s early days last year.

At the beginning of the pandemic, CBA economists forecast an 11 per cent fall in house prices over three years under their ‘best case’ pandemic scenario.

But it’s the bank’s worst-case scenario of a prolonged downturn that had factored in the risk of a 30 per cent plus fall in prices, which received a lot of publicity.

Now it’s understandable that in March last year no one really knew what was ahead, and clearly unprecedented government support as well as fiscal and monetary stimulus underpinned our property markets, supported jobs, and allowed us to have a short sharp recession with a quick rebound.

The bank’s head of Australian economics, Gareth Aird admitted had that this turnaround had taken many in the industry by surprise saying:

“The negative impact that COVID-19 had on Australian property prices turned out to be much more muted than almost any forecaster expected, us included,” he wrote.

“We were earlier than most, however, to recognise this and revised our call in September 2020 to look for a smaller peak-to-trough fall and a decent lift in prices over 2021.

Mr. Aird wrote:

“In many respects, it’s a simple story.

New lending has lifted sharply.

Dwelling prices are rising briskly in most capital cities.

And turnover is up significantly on year ago levels.

The boom is being driven by record low mortgage rates coupled with a V‑shaped recovery in the labour market.

Borrowing rates, which are the single biggest driver of prices in the short run, remain below the rental yield in most markets across Australia.

This is an unusual situation and means that property markets across the country need to find an equilibrium.

For the bulk of Australia, equilibrium will be achieved via further dwelling price rises.”

 

Article Source: propertyupdate.com.au

Opinion

Little movement on HTW residential property clock in April

residential property

Herron Todd White have released their April property clock, and there has been little movement in the residential sector.

Broome and Canberra were the only locations to change their position on the clock in terms of residential housing values, with both regions moving to ‘rising market’.

There were also few changes to the property clock for the residential unit market last month, with the biggest shift being Canberra moving to a declining market.

oowoomba units shifted to ‘start of recovery’ and Emerald is now classified as a ‘rising market’.

The residential property clock

Top of the clock:

Houses – Albury, Bathurst, Burnie/Devonport, Dubbo, Launceston, and Tamworth’s housing values all remain at the peak of the market.

Units – The best-performing unit markets include five of the same locations that featured at the top for houses: Albury, Bathurst, Burnie/Devonport, Launceston, and Tamworth.

Starting to decline

Houses – Wodonga

Units – Wodonga

Declining market

Canberra’s unit market was the only area classified as in decline.

Approaching bottom of the market

No areas

Bottom of the market

Houses – Albany, Geraldton, and Kalgoorlie remain at the bottom of the market.

Units – Albany, Geraldton, and Kalgoorlie all make another appearance for units, along with Sydney and the Whitsunday region.

Start of recovery 

Houses – Alice Springs, Bundaberg, and Darwin’s housing markets were all classified as being at the start of their recovery.

Units – Alice Springs, Brisbane, Bundaberg, Cairns, Canberra, Darwin, Emerald, Ipswich, Melbourne, Perth, South West WA, Toowoomba, and Townsville’s unit markets are also starting to recover.

Rising market

Houses – Once again, it’s a crowded field on the rising market end of the clock, with Adelaide, Adelaide Hills, Ballina/Byron Bay, Barossa Valley, Brisbane, Broome, Cairns, Canberra, Central Coast, Coffs Harbour, Emerald, Gladstone, Gold Coast, Hervey Bay, Hobart, Illawarra, Ipswich, Karratha, Lismore, Mackay, Melbourne, Mildura, Mount Gambier, Newcastle, Perth, Port Hedland, Rockhampton, Shepparton, South West WA, Southern Highlands, Sunshine Coast, Sydney, Toowoomba, Townsville, and Whitsunday housing markets all on the rise.

Units – Adelaide, Adelaide Hills, Ballina/Byron Bay, Barossa Valley, Broome, Coffs Harbour, Dubbo, Gladstone, Gold Coast, Hervey Bay, Hobart, Illawarra, Karratha, Lismore, Mackay, Mildura, Mt Gambier, Newcastle, Port Hedland, Rockhampton, Shepparton, Southern Highlands, and the Sunshine Coast’s unit markets were all classified as rising.

Approaching peak of the market

Geelong was the only location classed as approaching the peak of the market for both houses and units.

 

Article Source: eliteagent.com

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Opinion

Is now a good time to buy property? Nearly 40 per cent of people think so, despite record house prices

house prices

House prices are at historical highs, records tumble every weekend at real estates auctions around the country and price growth rates continue to rise.

Despite those facts, nearly 40 per cent of Australians believe that now is a good time to buy.

According to new research from the financial comparison website Canstar, 38 per cent of those surveyed believed that it was a good idea to buy property now.

Canstar group executive financial services Steve Mickenbecker said that of those who thought it was a good time to buy, many were expecting prices to continue to rise. They also cited low interest rates as another reason.

“Either way there will be no shortage of buyers as sellers come out,” he said.

“Today the market is overwhelmed with buyers, auctions are intensely competitive, open houses crowded, and unconditional contracts are becoming the norm. Low housing supply on the market has intensified the fear of missing out. We are in a low interest rate frenzy.”

Of the 39 per cent who said they didn’t think now was a good time to buy, 45 per cent said the market was currently in a bubble, inflated or under-supplied.

Mr Mickenbecker said the almost-equal number of respondents who said it was a good time and a bad time to buy indicated the rapid growth was slowing down.

“The Reserve Bank and APRA are likely to welcome a leading indicator of a return to balance, tempering growth and discouraging bank excess, but at the same time strong enough to support sustainable economic growth that won’t implode,” he said.

“The Reserve Bank doesn’t want to hurt the broader economy with higher interest rates and currency and is hoping for healthy property prices to support spending, but at a slower pace, so first-home buyers can afford to stay in the race.”

The latest quarterly Domain House Price Report, released last week, found price growth had hit a 32-year high in March.

Sydney’s median house price for the last quarter was $1.3 million, and Melbourne’s reached a record high of $975,000. Hobart’s was just above $600,000, and prices in Canberra grew 20 per cent in a year to a median of $930,000.

Brisbane and Adelaide’s median house prices were at their highest ever, and Perth’s was at its highest since December 2015. Darwin’s median house price was at its highest since December 2017.

CoreLogic figures released this week showed the rapid growth had started to slow, but prices continued to grow in every capital city and regional market in April.

“First-home buyers have been anything but deterred from the market and have leapt in with gusto, encouraged by government incentives,” Mr Mickenbecker said. “They are increasingly competing with investors able to make unconditional offers and blow them away at auctions, and would clearly welcome a more stable market.

“The market continues unabated for now, but a slow and steady future is hopefully ahead of us.”

 

Article Source: www.domain.com.au

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Opinion

CoreLogic: Home values continue to rise but the pace of growth loses steam in April

Home values

Australian housing values lifted by 1.8% in April according to CoreLogic’s national home value index, with the monthly pace of capital gains easing from a 32-year high in March (2.8%).  Although growth conditions have slowed, housing values are still rising at a rapid pace, up 6.8% over the past three months to be 10.2% higher than the COVID low in September last year.

CoreLogic’s research director, Tim Lawless, says the pace of capital gains could slow further over the coming months as inventory levels rise and affordability constraints dampen housing demand.

“The slowdown in housing value appreciation is unsurprising given the rapid rate of growth seen over the past six months, especially in the context of subdued wages growth.  With housing prices rising faster than incomes, it’s likely price sensitive sectors of the market, such as first home buyers and lower income households, are finding it harder to save for a deposit and transactional costs.”

Home values

Home values

 

There is already some evidence of fewer first time buyers in the market, with the Australian Bureau of Statistics reporting a -4.0% fall in the value of first home buyer home loans through February, the first drop since May last year.

Despite the slowdown, positive housing market conditions remain geographically broad-based with every capital city and ‘rest-of-state’ region continuing to record a lift in dwelling values over the month.   Darwin (2.7%) and Sydney (2.4%) recorded the largest month-on-month rise in dwelling values, while Perth values recorded the lowest rate of growth amongst the capital cities at 0.8%.

The four smallest capital cities recorded double digit annual growth (Adelaide 10.3%, Hobart 13.8%, Darwin 15.3% and Canberra 14.2%), reflecting a smaller COVID-related disruption and an earlier start to the growth phase last year.  Melbourne is recording the lowest level of annual growth (2.2%) due to a larger downturn, attributable to the extended lockdown period last year.

The broad trend of houses outperforming the unit sector continued through April as higher density styles of housing experienced less demand amidst elevated supply across some inner city precincts.  At the combined capital city level house values (8.6%) have risen at double the pace of unit values (4.3%) over the first four months of the year.

“A preference shift away from higher density housing during a global pandemic is understandable, however a rise in flexible working arrangements also seems to be supporting greater demand for houses around the outer-fringes of capital cities.  Relatively weak investor activity, compounded by a supply overhang in some high-rise precincts, is also dampening price growth in unit markets,” Mr Lawless said.

Home values

 

 

Article Source: www.corelogic.com.au

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