ANZ: House prices to rise 17% nationally in 2021

author-avatar By on March 24, 2021
ANZ: House prices to rise 17% nationally in 2021

ANZ forecasts house prices in capital cities will spike 17% this year off the back of low interest rates and relaxed lending standards.

The big four bank said rock-bottom rates were more than offsetting the headwinds from elevated employment and very low population growth. 

Perth and Sydney are forecast to be the best performers, with house prices increasing by 19% in each followed by Hobart at 18%. 

Brisbane and Melbourne aren't far behind with a forecast of 16% price increases, followed by Adelaide (13%). 


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 23, 2021. View disclaimer.

Only four months ago ANZ forecast house prices would increase by 9% in 2021, and ANZ senior economist Felicity Emmet said the revised forecast came off the back of low supply and extremely high demand. 

"The strength in sentiment is putting upward pressure on prices, with low stock levels adding to the fear of missing out (FOMO) sentiment emerging in the market.gains of around 17% across the capital cities (up from 9% previously) in 2021," Ms Emmet said. 

"With interest rates the primary driver of price gains, we see strength across all capital city markets." 

ANZ's forecast is far more bullish than fellow big four lenders Commonwealth Bank and Westpac, which predicted 8% and 10% price increases this year respectively. 

anz1701

Source: ANZ

Ms Emmet said price gains were likely to slow in the second half of this year, but the Australian Prudential Regulation Authority (APRA) would still need to take action to stem the boom. 

"By June we expect prices to be rising at a more moderate pace given the end of government programs like JobKeeper and HomeBuilder, and a lift in fixed mortgage rates," she said. 

"By year end though, we expect the regulators will step in with macroprudential controls to address the overheating market, with the exact measures likely to be dependent on how the market develops over the next six months or so."

New Zealand has already announced similar measures, scrapping tax loopholes for investors and introducing Loan to Value (LVR) restrictions in an effort to slow their skyrocketing housing market. 

Fixed-rates set to rise 

Many lenders have taken the knife to fixed-rates instead of variable rates since the Reserve Bank's (RBA) most recent cash rate cut, and many are now offering their lowest ever

But with the end of the RBA's Term Funding Facility and increases in interest costs, Ms Emmet said fixed rates were likely to rise in the second half of the year. 

"Over the past six months, more than 30% of new loans have been at fixed rates. While we don’t have data on the tenor of these loans, it’s safe to assume that a large proportion will begin rolling off from May 2023," she said.

"By then, fixed rates are likely to be significantly higher and variable rates will also likely be higher given higher funding costs for the banks.

"So, even without a lift in the cash rate, the housing market will face higher rates as early as H2 2021, with a more significant tightening in 2023." 

Decreased affordability and debt levels concerning 

The forecast house price gains are likely to decrease affordability at a time when first-home buyers are taking on a record-amount of debt. 

ANZ found the average first-home buyer took on a $429,950 mortgage in January, only $1,000 less than the peak seen in 2019. 

The average first-home buyer loan size has approximately doubled between March 2004 and February 2021. 

Ms Emmet said some people's homeownership dreams may not be realised this year as a result of the price boom. 

"Strong price gains will lock some aspiring homeowners out of the market. Deposit affordability remains a key element of housing affordability."

Only 37% of those aged 25-29 were homeowners in 2016, compared to 41-45% between 2001-2011 and over 50% in the late 20th century.

"With policy support unlikely to fully offset price gains, it is unlikely we’ll see a reversal of this trend anytime soon," Ms Emmet said. 

anz1702

Source: ANZ


Photo by Joel Henry on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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