Westpac: Housing boom will see prices spike 15% in 2021

author-avatar By on April 20, 2021
Westpac: Housing boom will see prices spike 15% in 2021

Big four lender Westpac has revised its property price forecasts, tipping values to rise 15% in 2021.

The bank had previously predicted prices would rise 10% in 2021 and again in 2022 but changed its tune today.

With the market booming, Westpac said much of this growth would be seen this year, before slowing to grow by 5% next year. 

Westpac economists Bill Evans and Matthew Hassan said the housing market had started the year well ahead of expectations, and the rapid pace is unlikely to fade anytime soon. 

"Some moderation is likely, particularly as affordability becomes more stretched for owner occupiers," they said.

"However, a sudden loss of momentum near term looks unlikely, particularly with markets tight, price expectations bullish, investor activity showing signs of picking up and highly stimulatory financial conditions still firmly in place." 


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 19, 2021. View disclaimer.


The two economists said a large factor in the boom slowing next year would be intervention from the Australian Prudential Regulation Authority (APRA)

"The 20% ‘limit’ reflects two key views: that deteriorating affordability will become a more binding constraint for owner occupiers as prices rise; and that regulators will intervene in the market in 2022 as investor activity lifts and credit growth reaches uncomfortable levels." 

According to CoreLogic, home values rose 2.8% in March, the fastest rate of growth in 32 years, with Sydney's 3.7% increase leading the way.

Westpac said much of this growth was being driven by owner occupiers, but investor activity was likely to ramp up as the year progressed, leading to further price increases. 

"Deteriorating affordability will work to restrain owner occupier demand and slow price gains. If investors were to remain dormant that would likely be sufficient to cool the market," Mr Evans and Hassan said. 

"However, investors are unlikely to stay away given the momentum around prices – actual and expected." 

Westpac is the second most optimistic of the big four when it comes to the property price outlook for 2021.

Here's what the others predicted. 

CommBank house price forecast 2021

Commonwealth Bank (CBA) forecast in February property prices would rise by 8% in 2021 and 6% in 2022, with house prices to rise 16% in that time and unit prices by 9%. 

In March, CEO Matt Comyn revised that estimate at a Parliamentary hearing in Canberra, saying 2021 would now see an increase of 10% - a minor adjustment. 

CBA Head of Australian Economics Gareth Aird said a number of factors made it clear the property market was in for a bumper year. 

"New lending has lifted sharply. Dwelling prices are rising briskly in most capital cities. And turnover is up significantly on year-ago levels," Mr Aird said.

"Near term indicators of momentum suggest conditions will further strengthen. Auction clearance rates are sitting at levels consistent with double-digit dwelling price growth.

ANZ house price forecast 2021

ANZ predicted in March property prices would rise by 17% this year, with Perth and Sydney set to be the best performers at 19%. 

ANZ forecast at the end of last year that prices would rise by 9% in 2021, but ANZ senior economist Felicity Emmet said the revision was made due to demand outstripping supply so heavily.

"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." 

NAB house price forecast 2021

NAB Executive Home Ownership Andy Kerr told Savings.com.au in February the lender expected property prices to rise 10% 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 said. 


Image source: Westpac

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.

*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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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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