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NAB Scraps House Price Call

House Price Call

NAB has revised forecasts for a pandemic-linked 15 per cent decline in house prices and says a jump in sentiment based on stimulus measures and record-low interest rates could now see prices grow by 5 per cent next year.

Bank economists now expect strong growth next year, followed by further 6 per cent lift in 2022.

Promising results from two separate vaccine trials have incited optimism as well as the return of owner-occupier buyers to the market—particularly first homeowners—is now likely to limit the peak-to-trough decline in home values that started in April.

NAB chief economist Alan Oster said the rapidly improving conditions led the bank to substantially upgrade its forecasts for next year.

“This change in NAB’s housing market outlook comes after substantial upgrades to our forecasts for near-term activity and unemployment, as well as the fact that activity in the housing market has held up substantially better than we initially expected.

“We expect that lower interest rates for an extended period will be a key support to the housing market over the next couple of years, seeing a boost to prices across the country.”

Oster warned that the sharp slowdown in population growth, due to border closures, remained the central risk to house prices, particularly in Sydney and Melbourne.

Oster also said that house price growth would likely to be stronger than the apartment segment over the next 24 months.

NAB said Melbourne’s house prices are projected to grow by 3.6 per cent over 2021, while Sydney’s will nudge up 4.4 per cent.

Further gains in 2022 are expected with Sydney house prices to rise six per cent and Melbourne 5.4 per cent.

Earlier in the year, NAB had predicted prices in Sydney to decline -4.9 per cent and -6.5 per cent in Melbourne in 2021, following 2020 declines of -4.7 per cent in Sydney and -7.3 per cent in Melbourne.

“While the deterioration in the labour market would normally weigh on prices, the significant government support has mitigated the rise in unemployment and hit to household incomes,” Oster said.

The bank advised that housing market sentiment had returned in the third quarter of the year, but remains weak, noting the deterioration in Victoria amid stage four lockdown in Melbourne and a modest improvement in New South Wales.

Victoria was the only state to go backwards in the NAB Residential Property Index, which recovered to -7 points from a survey low of -33 points in the second quarter. Victoria fell -3 points to a new survey low -53.

This offset sharply higher sentiment in other states, particularly Western Australia and South Australia.

NAB’s latest projection follows a revision last month by Commonwealth Bank, the country’s largest mortgage lender, of its expected peak-to-trough decline from between 10 and 12 per cent to just 6 per cent.

ANZ also expects strong growth next year with house prices in Perth expected to lift by 12 per cent, Brisbane 9.5 per cent and Hobart 9.4 per cent.

ANZ has also forecast Sydney prices to rise 8.8 per cent—close to the national average—while Melbourne prices will grow by 7.8 per cent.

 

The post “NAB Scraps House Price Call” by Ted Tabet appeared first on the theurbandeveloper.com Blog

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Finance

How will the end of mortgage deferrals affect the housing boom?

mortgage deferrals

Australia’s red-hot property market has enjoyed extraordinary support from the federal government’s economic stimuli, wage subsidies and leniency in lending policy from the banks.

A key question now is how the market will adjust as this COVID-19 induced emergency support is wound back.

At the height of the worst peace-time recession in a century last year, banks pulled out all stops to avoid a meltdown in the asset that dominates their loan books: residential property.

Home loan and small business customers were given an option of putting their loan repayments on hold, and hundreds of thousands took up the offer. At the peak, banks allowed some $250 billion in small business loans and home loans to be put on hold.

These deferrals officially ended at the end of March and banks say the vast majority of affected customers have returned to making mortgage repayments. However, a small minority are still struggling – some may need to eventually sell their properties.

Commonwealth Bank provides a case in point. It says the overwhelming majority of people who deferred have returned to making repayments or restructured their loans. About 1.9 per cent are working with teams that help sell properties.

The bank has a moratorium on forced sales by owner-occupiers until September.

CBA retail banking group executive Angus Sullivan expects the end of deferrals would have a “very, very marginal” impact on the supply of homes for sale, as it would probably be overpowered by the stimulatory impact of ultra-low interest rates.

“I think the driver of the housing market, first and foremost, is probably low rates,” Sullivan says.

CBA’s rivals have experienced similar trends. National Australia Bank had 1037 deferred home loans at the end of February after allowing about 110,000 people to pause repayments last year.

“Given the significant number of customers who have returned to making repayments and additional support available, we don’t expect the end of deferrals to have a material impact on the housing market,” says NAB’s group executive for personal banking Rachel Slade.

Westpac has about 2000 loans in deferral – a tiny proportion of its mortgage book, while official figures last week showed ANZ Bank had 0.9 per cent of its housing loans in deferral at the end of February.

However, the end of mortgage deferrals could still weigh on some parts of the property market.

CoreLogic research director Tim Lawless says the risk from deferred loans has “significantly diminished,” though parts of the market dominated by investors could still feel the impact of deferrals ending.

Banks have not said where most of the remaining deferred loans are located, but Lawless says they are probably concentrated among investors, particularly in inner-city Sydney and Melbourne apartment developments. He believes banks would start being less patient with struggling property investors.

“Just reading between the lines, it seems like there will probably be less flexibility for investors,” he says. “It’s a net negative for the housing market but I think the impact will be quite localised.”

Like the banks, Lawless believes the broader property market has enough momentum to offset the impact of loan deferrals ending, but he does not think the pace of price growth can continue for much longer.

It is clearly not sustainable for Australia to continue notching up the fastest growth in house prices since the 1980s at a time when household incomes are not rising. It will simply get too expensive for buyers to keep bidding up prices.

The end of JobKeeper and other government schemes, including building grant program HomeBuilder, are also likely to temper the red-hot demand for housing in the months ahead.

 

Article Source: www.brisbanetimes.com.au

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Finance

New low as Homestar Finance cuts its two-year fixed owner-occupier rate to 1.74%

Homestar

Homestar is equal lowest with Reduce Home Loans for the lowest variable rate at 1.79%.

Homestar Finance is offering the lowest two-year fixed rate in the home loan market.

Homestar Finance has cut its two-year fixed owner-occupier rate by 14 basis points to 1.74%.

The rate cut move knocks Westpac from the top spot after it offered the lowest rate.

The increased rate competition was dubbed a “raging rate war” by the Mortgage Professional Australia website.

“This loan is the lowest two-year fixed rate on the market and also the lowest overall home loan rate available nationally,” RateCity research director Sally Tindall told The Australian.

“It also has one of the most competitive revert rates at 2.24%.”

Some 450 fixed mortgage rates have been cut over the last two months.

Homestar is also equal lowest with Reduce Home Loans for the lowest variable rate at 1.79%.

Greater Bank has the lowest fixed rate in the market, with its one-year fixed rate sitting at 1.69%, with the rate only available to customers in New South Wales, Queensland and the Australian Capital Territory.

 

Article Source: www.urban.com.au

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Finance

Warnings over proposed overhaul of responsible mortgage lending

mortgage lending

Record high mortgage lending to owner-occupiers, surging property prices and lenders offering low deposit mortgages could make for a perfect storm if the government’s attempt to repeal responsible lending obligations is successful, critics warn.

They say loosening responsible lending obligations would add fuel to the already hot property market and increase indebtedness, leaving home owners struggling to meet repayments if interest rates were to rise.

Figures from the Australian Bureau of Statistics for January show a 52 per cent increase in the value of new home lending to owner-occupiers compared to January 2020.

The government says repeal of responsible lending obligations is needed to free up credit, particularly to small and medium-sized businesses, and to remove red tape for lenders and borrowers. It says the protections for vulnerable customers are preserved.

The responsible lending obligations have been a bulwark of consumer protections since coming into effect in 2009. They require lenders to make credit assessments and approvals in accordance with the obligations and help ensure people are not being sold into unaffordable loans.

The government decided to pursue repeal of the obligations last year, during the depths of the COVID-19, after consultations with banks, as a way to get credit flowing through the economy again.

But with the economy staging a V-shaped recovery, house prices booming and mortgage lending for owner-occupiers at record levels, critics, including researchers, many consumer rights groups and some economists, say the responsible lending obligations are needed more than ever.

“It’s crazy to think the government is still pushing ahead with the scaling back of responsible lending obligations at a time when the property market is going through the roof,” says Sally Tindall, the research director at RateCity.

 

Article Source: www.brisbanetimes.com.au

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