Westpac forecasts house prices to rise 20% in next two years

author-avatar By
on February 22, 2021
Westpac forecasts house prices to rise 20% in next two years

Westpac has forecast Australian dwelling values will rise 10% in 2021 and 2022, with the market moving into a sustained boom.

The forecasts are significantly more optimistic than the big four bank's September forecast, where they expected prices would rise by just 4% this year and 10% next. 

Westpac chief economist Bill Evans said the last four months had seen a faster and stronger than expected turnaround, with momentum suggesting it will be better sustained.

"The upturn is being supported by record low interest rates; the confident expectation amongst borrowers that these rates will remain low for years to come; ample credit supply; and an improving economic backdrop, as the roll-out of vaccines promises to bring the pandemic to an end and drives a sustained lift in confidence," Mr Evans said. 

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
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

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

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

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

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

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

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees

Rates correct as of January 18, 2022. View disclaimer.

House prices rose 0.9% in January, the fourth consecutive month of increases, according to CoreLogic, with every capital city and regional location recording an increase in values. 

Mr Evans said some of these price gains were off the back of transitory factors, like a catch-up on last year's virus disruption, an unusually active holiday period for markets, and the Federal Government's HomeBuilder scheme.

"However, even allowing for this, the picture is unambiguously strong. Most tellingly, buyer demand has run well ahead of ‘on market’ supply, with sales outstripping new listings by 34% over the last six months and ‘stock on market’ down to just 2.5 months of sales – the long run average is 3.8.

"A lift in new listings will no doubt be forthcoming but for now this is clearly a seller’s market."

NAB Executive, Home Ownership, Andy Kerr, said NAB was also forecasting strong growth in the housing market this year.

“NAB is currently forecasting house price growth of around 10% for Australia’s capitals in 2021, with apartment price growth likely to be a bit more subdued, particularly in Melbourne and Sydney," Mr Kerr told Savings.com.au.

Westpac's forecast is more optimistic than fellow big four bank Commonwealth Bank (CBA), who forecasted house prices would rise by 16% over the next two years.

westpac20

Central bank may intervene in housing market

Mr Evans said the Reserve Bank (RBA) holding the cash rate at 0.1% until at least 2024 was highly stimulatory to the housing market, but a likely adjustment to its Yield Curve Control policy may push up fixed rates.

"This adjustment will increase fixed term mortgage rates and may take some heat out of the market at the margin but is unlikely to derail what will be a very well-established price upturn by 2022." 

In order to prevent the housing market from becoming unstable, Mr Evans said the RBA may be forced to reintroduce Loan to Value (LVR) restrictions on investors.

"They have clearly developed more confidence in these tools following their successful deployment in 2015 and 2017 and the RBA has already indicated these policies are an option if housing market concerns resurface," Mr Evans said.

"Housing credit will continue to see robust gains with investor activity becoming increasingly prominent – stoking fears of ‘overheating’.

"Through 2022 new lending is likely to peak around 50% higher than the previous peak in 2017." 

The greatest uncertainty in the housing market is migration, with new dwelling construction running well ahead of population-driven requirements over the past year.

"If borders remain closed for longer or migration inflows are slow to restart that could lead to a market-wide physical oversupply of dwellings by 2022," Mr Evans said. 

"How that may influence market conditions and price growth is unclear.

"For example, rental vacancy rates may remain elevated for longer, perhaps even pushing higher, but that may not do much to deter investors seeking expected price gains, particularly as rental yields are likely to remain above funding costs."


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. 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. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

Latest Articles

author-avatar
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.

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree to the Savings Privacy Policy