JobKeeper extension would see house prices spike higher in 2021
The 'Christopher's Housing Boom and Bust Report 2021' outlined its scenarios for the property market next year, with house prices to spike higher should JobKeeper be extended past its planned March end date.
A best-case scenario would see the cash rate unchanged, an expansion of the Reserve Bank's quantitative easing (QE) program, containment of a third COVID wave and a vaccine roll-out, as well as a JobKeeper extension.
Capital city house prices would rise 5-9% in this scenario, with Perth the stand-out performer, followed closely by Sydney and Adelaide.
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| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
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5.89% p.a. | 5.80% p.a. | $2,962 | Principal & Interest | Variable | $0 | $0 | 80% |
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5.99% p.a. | 6.02% p.a. | $2,995 | Principal & Interest | Fixed | $0 | $0 | 60% |
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5.93% p.a. | 5.93% p.a. | $2,975 | Principal & Interest | Variable | $0 | $395 | 70% | Disclosure |
SQM's analysis found an extension of JobKeeper was essential to the ongoing momentum of the housing recovery, as without it, Sydney and Melbourne's market could stall.
In fact, the research found JobKeeper ending, and JobSeeker returning to its base rate, would be worse for house prices than if no vaccine was released next year, borders remained closed, and there was a negative cash rate.
The latest figures from CoreLogic found house prices had risen for the second consecutive month in November, after dipping 2.1% between April and September.
SQM house price forecasts 2021
Managing Director of SQM Research Louis Christopher said the national housing market had responded to unprecedented economic stimulus as well as the record low cash rate.
"Auction clearance rates have lifted since mid-year and various dwelling price measurements have started to record price rises," Mr Christoper said.
"It is likely that the housing market will gain further momentum on the back of increased investor activity, especially from those who seek some sort of income yield."
SQM said the proposed axing of stamp duty would be stimulatory in Sydney, while inner city-units would continue to record price falls.
Melbourne's lockdown is likely to subdue the housing market recovery, but rate cuts and State and Federal government stimulus would put a floor underneath the market for houses.
A significant shortage of Perth rental properties is likely to translate into even faster rent increases and buyer activity next year.
Too big to fail?
Mr Christopher said he had misgivings on the longer-term consequences of JobKeeper, despite advocating for its extension.
"If housing is regarded as an asset class that is not allowed to fall, Australia could have some rather serious social issues surrounding home ownership rates over the long term," he said.
"In the meantime, risks have risen that this new recovery will be one of the more speculative rises seen in some time.
"Let’s keep in mind unemployment remains elevated and net migration is expected to be negative next year. We have a surplus of inner-city units in our two largest cities.
"And if there was another negative macro event in 2021, there is not much room left to cut lending rates further."
He added he worried there was sentiment creeping in that the government would never let the housing market fall.
“Many in the community are starting to think they cannot ever lose on housing. That the Government will always be there to step into the housing market, if need be.
"And that is a scary idea...”