AFTER predicting a large 10 per cent fall in national property prices from the peak in April 2020 to June 2021, Westpac has revised its forecast to a more moderate 5 per cent, with prices then “bouncing” 15 per cent.
It said many capital city markets had proved resilient during the pandemic, with Perth expected to be remain flat as opposed to the predicted 4 per cent fall and Adelaide expected to rally from an 8 per cent drop to 2 per cent growth.
Sydney’s price decline has been revised from 10 per cent to 5 per cent, but Melbourne was still expected to record a 12 per cent decrease by June.
National prices have already declined 2.7 per cent since April and Westpac said homeowners could expect a further 2.3 per cent reduction by the end of the financial year.
Chief economist Bill Evans and senior economist Matthew Hassan were then forecasting a 15 per cent national price “surge” until mid-2023, or a very healthy growth rate of 7.5 per cent per year.
After languishing in the doldrums since 2014, Perth is one of the markets set to lead the recovery with a growth rate of 18 per cent predicted, with Brisbane expected to see “massive gains” of 20 per cent.
Reiwa president Damian Collins said, with low interest rates, record-high housing affordability and a shortage of property, price growth in Perth was quite foreseeable.
“It won’t be excessive, but I wouldn’t be surprised if we got 3-5 per cent between now and June/July 2021,” he said.
Mr Evans said the (national) recovery would be supported by sustained low rates, which were likely to be even lower than current levels; ongoing support from regulators; substantially improved affordability; sustained fiscal support from both federal and state governments; and a strengthening economic recovery — particularly once a vaccine becomes available, which Westpac expects in 2021.
Mr Collins said population growth would also boost the Perth market, particularly with people returning to WA from overseas needing housing.
“The WA government has been asked to take in another 500 people per week, and while not all of them will stay in WA we will also have Western Australians coming back from over east, and I’m not sure where they’re going to be housed,” he said.
“We already have a massive rental shortage, a shortage of houses available for sale and we’ve been building very low numbers of properties over the last three or four years — while the building grants have been helpful in getting new supply, most of it has been used by first-home buyers in the outskirts, not nearly enough has been used in infill areas.
“We’re going to see a really challenging environment where demand will outstrip supply and we would expect to see price growth.”
Under these conditions, Mr Collins said Westpac’s 18 per cent forecast over the next three years was possible, but perhaps not as exciting as it sounded.
“You’ve got to remember we’re down 20 per cent or more from the highs five years ago, so even an 18 per cent rise is going to be struggling to get us back to where we were,” he said.
“It’s always hard to predict the future with any certainty, but given where we sit at the moment, if we continue to get population growth, the mining sector remains strong and we remain relatively free of COVID, then it’s certainly in the realms of possibility.”
Westpac’s economists said the property market improvement was unlikely to be a “straightforward ride”, with a four-stage housing cycle likely.
Phase one saw the initial shock to the market, with the upcoming December and March quarters marking phase two during which Mr Evans tipped relatively stable prices, and possibly some “modest increases”.
Phase three will run through 2021 and feature “some limited resumption of downward pressure on prices” amid an “increase in ‘urgent’ or distressed sales” as borrowers struggled or were unable to resume mortgage repayments.
But Mr Evans said prices would then lift again in the fourth phase “once this selling pressure has worked through the system”.
The forecast revision comes amid improving optimism among economists about the housing market following better than expected performance and data, housing finance approvals last week jumping by a far stronger than expected 8.9 per cent in July.
This article was originally published by Natalie Hordov for Western Suburbs Weekly and can be read in full here.