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.

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.


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): 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.

Latest Articles

author-avatar
Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

Get free insights & tips monthly

By subscribing you agree to the Savings Privacy Policy

Loading data please wait...

{{returnData.productName}}

Overview

Current Rate

{{returnData.currentRate | percentage:2}}

Comparison Rate*

{{returnData.comparisonRate | percentage:2}}

Rate Type

{{returnData.rateType}}

Advertised Rate

{{returnData.advertisedInterestRate}}

Comparison Rate*

{{returnData.comparisonRate}}

Monthly Repayment

{{returnData.monthlyRepayment}}

Interest Type

{{returnData.interestType}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Bonus Interest Rate

{{returnData.bonusInterestRate | percentage:2}}

Total Interest Rate

{{returnData.totalInterestRate | percentage:2}}

Introductory Rate

{{returnData.introductoryRate | percentage:2}}

Introductory Term

{{returnData.introductoryTerm}}

Base Interest Rate

{{returnData.baseInterestRate | percentage:2}}

Term

{{returnData.term}}

Advertised Interest Rate

{{returnData.advertisedInterestRate | percentage:2}}

Interest Frequency

{{returnData.interestFrequency}}


Fees and Features

Ongoing Annualised Fee

{{returnData.annualFee}}

Upfront Fee

{{returnData.upfrontFee}}

Offset Account

Redraw

Principal & Interest

Interest Only

N/A{{returnData.interestOnly}}

Max loan to value ratio (LVR)

{{returnData.maxLVR | percentage:0}}

Lump sum repayments

N/A

Additional repayments

Maximum Loan Term

{{returnData.maximumLoanTerm}}

Upfront Fee

${{returnData.upfrontFee}}

Ongoing Monthly Fee

{{returnData.ongoingFees}}

Early Repayment Fee Applies

N/A

Vehicle Types

{{returnData.vehicleType}}

Maximum Vehicle Age

{{returnData.maximumVehicleAge}}

Pre Approval Available

N/A

Online Application

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Account Keeping Fee

{{returnData.accountKeepingFee}}

Minimum Monthly Deposit

{{returnData.minMonthlyDeposit}}

Linked Account Required

N/A

Interest Calculated

{{returnData.interestCalculated}}

Interest Paid

{{returnData.interestPaid}}

Online Application

N/A

ATM

N/A

EFTPOS

N/A

Minimum Deposit

{{returnData.minDeposit | currency : '$' : 0}}

Upfront Fees

{{returnData.upfrontFee | currency : '$' : 0}}

Annual Fees

{{returnData.annualFee | currency : '$' : 0}}

Notice Period to Withdraw

{{returnData.noticePeriodToWithdraw}}

Online Application

N/A

Automatic Rollover

N/A

Maturity Alert

N/A