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ANZ has scrapped its forecast for a pandemic-linked 10 per cent drop in house prices and says a jump in sentiment based on stimulus measures and record-low interest rates will curb the decline, and could even result in “modest” price growth this year.
It expects strong growth next year – housing prices in Perth are likely to jump 12 per cent, Brisbane 9.5 per cent and Hobart 9.4 per cent. Sydney prices are expected to rise 8.8 per cent – close to the national average – but Melbourne prices will lag, with 7.8 per cent growth.
The return of owner-occupier buyers to the market – particularly first homeowners – was now likely to limit the peak-to-trough decline in home values that started in April to just 2.1 per cent nationally, and after a 1.7 per cent gain this year, prices were now likely to rise almost 9 per cent next year.
The decision by the third-largest mortgage lender to do away with its “too pessimistic” forecast follows the improved sentiment around housing that has been showing up in rising housing finance and auction clearance rates, spurred by the Reserve Bank’s rate cut this month.
The strength of the housing sentiment in the face of unresolved challenges the economy still had to face next year was surprising, said ANZ Research senior economist Felicity Emmett, who authored the report with colleague Adelaide Timbrell.
“Unemployment is nearly 7 per cent. We know there is so much uncertainty next year,” Ms Emmett told The Australian Financial Review. “I have been surprised that people are so upbeat on housing.”
The number of mortgage holders going off payment freezes is falling, but some of their problems remain.
The ABS’s latest household survey of the effects of COVID-19, published on Monday, showed the proportion of people facing difficulties in meeting mortgage payments rose to 5.1 per cent last month from 2 per cent in June.
The pandemic was also hitting renters – generally lower earners – harder than it was affecting homeowners, Ms Emmett said.
“For home buyers and owners, that impact of the pandemic has been a lot less marked than for people who are not home buyers,” she said. “The pandemic has affected the renter market [more] whereas the people in high-income jobs [mostly] kept their jobs. In the top quintile of paying jobs, the number of people in employment has increased. That’s something as well we previously hadn’t appreciated.”
Activity is picking up. Three-quarters of homes got sold at auction in the week to Sunday, as buyers chased properties in Sydney and Melbourne, boosted by record-low borrowing costs and significantly reduced stock.
ANZ’s move 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 just 6 per cent.
But the call by Melbourne-based ANZ reflects the Reserve Bank’s latest, historic, rate cut to 0.1 per cent, the latest decline in the benchmark cash rate, which was “dominating” the house price cycle and had helped turn sentiment around sharply, the economists said.
Risks to the revised forecast were evenly balanced, they said.
“An early vaccine rollout and the resulting lift to sentiment could drive larger price gains than we currently anticipate.
“That said, we think regulators would be quick to step in with macroprudential measures if the market looked be overheating.”
Source: Australian Financial Review