Australian house price growth is predicted to slow by the end of 2021.
The rapid rate of Australian house price growth has been predicted by economists to slow by years end, as affordability pressures bite as well as more properties come on the market for sale.
The real estate market has actually risen at a much faster rate than some bank economists anticipated, which left them to upgrade their projections when CoreLogic showed that dwelling values soared by 10.6 per cent over 12 months across Australia.
While other researchers that made favourable projections earlier this year are holding their ground.
House prices have spiralled as Australia recovers from the pandemic, fuelled by low-interest rates, government grants and a desire for more spacious homes equipped for remote work. High demand coincided with scarce supply as owners were reluctant to sell into a recovering economy.
AMP Capital earlier anticipated a 15 per cent rise in national house prices over the year to December and a further 5 per cent next year.
AMP Capital chief economist Shane Oliver has since upgraded his forecast saying national house prices could rise by as much as 18 per cent by the end of the year.
It has just taken off so quickly and right now the factors that have driven the boom are still there.
Low-interest rates, the economic recovery despite COVID-19, government incentives for housing and an overall fear of missing out (FOMO) were helping to continue pushing the market forward, he said.
But, with fixed interest rates rising slightly for mortgage lenders, and affordability issues emerging particularly for first-home buyers, now competing against investors for properties, he expected growth to slow.
It does look like the momentum has slowed a little bit with auction results slowing slightly in cities like Sydney since May.
AMP Capital chief economist Shane Oliver believes house prices could start to fall in 2023, especially if the Reserve Bank of Australia opts to raise interest rates a year earlier than is currently predicted.
NAB had previously predicted a rise of 14 per cent across all capital cities over 2021 but later upgraded this to 16 per cent.
While NAB Group chief economist Alan Oster is of the opinion that the RBA won’t be changing the interest rates before 2024, because of the risk of affordability woes that could possibly start hitting the property market. Once the interest rates go up, they’ll in all likelihood go up by 2 per cent in the following 12 to 18 months.
ANZ predicted in March a 17 per cent rise in house prices across Australia by the end of 2021. ANZ senior economist Felicity Emmett does not expect the prediction to change. Given that ANZ is expecting the market prices to slow now in the second half of 2021 year as more properties come onto the property market and auction clearance rates are slowing.
The boom may be close to an end as the long-term decline in interest rates bottoms out, property undersupply swings towards oversupply and the ‘escape from the city’ phenomenon that has been greatly influenced by the COVID-19 pandemic removes some pressure off city property prices.
This might take heat off the capital city property price growth in the next decade.
The COVID-19 pandemic has created a profound shift in how office employee’s work. The work-from-home trend will in all probability persist, despite more employees going back to working from their previous workplaces several days a week.
This suggests to us that there is much less demand to live near to workplaces, instead, the focus is more on way of life. Producing a greater need for houses in smaller cities, regional areas and outer city suburbs, that’s typically more economical.
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