ANZ has revised its house price forecasts and expects the market to rebound strongly next year.
The big four bank forecast October 2020 would mark the bottom of the price cycle and next year would see gains of around 9% across the capital cities.
Perth house prices are set to be the strongest performer, forecast to jump 12%, followed by Brisbane at 9.5%, Hobart at 9.4%, and Sydney at 8.8%.
Melbourne is expected to lag behind the other capitals, posting growth of 7.8%.
Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.
Smart Booster Home Loan
- Discount variable for 1 year <=80% LVR
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Monthly repayments: $1,476
- Discount variable for 1 year
- No ongoing fees
- Unlimited redraw facility
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.
"Our view that house prices would decline around 10%, peak to trough, has proven too pessimistic: low rates have trumped factors like elevated unemployment and low population growth," economists Felicity Emmett and Adelaide Timbrell said.
"Government income support and the deferral of home loan repayments have also helped support the market.
"The RBA’s [Reserve Bank] recent rate cut, the further decline in fixed mortgage rates and the prospect of low rates for some years will all add to the momentum currently in the market."
They added house price gains could be even greater should there be a successful vaccine available at the start of the year.
"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 macro-prudential measures if the market looked to be overheating."
Low population growth is expected to be the main headwind to price gains, with overseas migration accounting for two-thirds of Australia's population growth in 2019.
ANZ said rental markets were also turning, but lagged some way behind the buyers' market.
Policy and lender support to mitigate 2021 labour market risks
ANZ's economists said although housing debt was up, so were savings, which would offset the forecast spike in the unemployment rate.
"While high housing debt may pose a risk next year in light of expected higher unemployment rates, the spike in household savings in Q2, particularly by indebted owner-occupiers, suggests many households have increased their mortgage buffers," they said.
"On average, owner-occupiers were less likely than renters to lose income and employment through the pandemic downturn."
Internal ANZ data and RBA research found the bulk of mortgage deferrals were likely to already have expired, and lenders were likely to offer further support, making significant forced selling unlikely.
ANZ mortgage deferrals
According to ANZ, this was likely to offset the marginal rise in housing arrears, which at 1.2% is only 0.2% higher than September last year.
"ANZ 90+ day arrears data show that Victoria and NSW arrears rose modestly between March and September, but arrears rates in other states have declined through the same period."
"RBA research suggests that housing arrears could rise to 2% as mortgage deferrals expire and unemployment continues to rise.
"Our view is that accommodative lender measures and a lower peak in the unemployment rate will mitigate this risk."
HomeBuilder hits the mark
ANZ said the Federal government's HomeBuilder scheme had been a success as approvals for houses and renovations had risen sharply.
"Fiscal stimulus is having an impact. Approvals have risen 27% over the past three months, helped by the HomeBuilder scheme which is supporting the detached house building sector," the authors said.
Western Australia, which had additional state grants, has seen a 77% jump in approvals in the three months to September, and Queensland also posted strong growth (+38%).
Victorian house approvals also hit a record high in September.
A recent ANZ survey showed 61% of respondents operating in the residential sector expected the HomeBuilder program to have a positive impact on their business, while 75% of developers expected a positive impact (up from 70% in the previous survey).
See also: Four months on, is HomeBuilder working?
Residential housing approvals
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): Credit Union Australia, 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.
*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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