Australia’s largest lender Commonwealth Bank has upgraded its home price targets for the next six months, citing record low interest rates for its more positive outlook.
The bank says residential property prices are predicted to drop by 6 per cent over six months lower than the 10 per cent drop it forecast in April, which it reaffirmed last month.
CBA’s head of Australian economics Gareth Aird said the bank now expected prices to plateau by the second half of next year—later than the initial December forecast.
“Parking the Melbourne issues to one side, what has genuinely surprised us is the resilience of house prices in some of the other capital cities considering the negative shock to labour markets around the country,” Aird said.
“We continue to expect prices to ease.”
CBA now forecasts prices to bounce back sharply by mid-next year and will fall by a smaller amount from the peak, with the expectations of a much larger disparity between outcomes by capital city than initially forecast.
In Melbourne, where strict lockdown measures have seen values fall by 2.3 per cent over the June quarter, prices are forecast to fall by 12 per cent, higher than an earlier forecast of 11 per cent.
Dwelling values in Melbourne continued to fall over August by 1.2 per cent—driven by declining population growth and mounting job losses—more than double the fall of the next weakest capital for the month, Sydney which was down 0.5 per cent.
Sydney prices are set to slide by 7 per cent—down from the 10 per cent expected in April.
CBA said it now expected a sharp turnaround by December next year, with prices in Sydney to rise by 2.9 per cent, while Melbourne is set to slide by 0.7 per cent annually.
In Brisbane, prices are forecast to lift by 1.6 per cent, Adelaide by 1.4 per cent and Perth by 1.9 per cent.
Canberra, where prices have been holding firm, insulated by the high proportion of government workers, is expected to outperform, with prices predicted to jump 3.1 per cent, followed by Hobart, lifting by 2.3 per cent.
Across the country, dwelling prices are set to rise by 1.6 per cent over the same period.
“Our forecast is for solid price growth in the second half of 2021 as the economic recovery gains traction and incredibly low interest rates once again become the dominant influence on dwelling prices,” Aird said.
Last month, ANZ said it maintained expectations that dwelling prices would fall 10 per cent from the peak to trough before bottoming out in the second half of 2021.
ANZ expects Melbourne house prices to fall by 15 per cent, Sydney by 13 per cent and Brisbane at a modest 6 per cent.
ANZ said Canberra, Adelaide and Perth are forecast to outperform the larger capitals with a smaller price drop expected at 2 per cent, 3 per cent and 4 per cent respectively.
NAB’s July outlook for property price falls between 10 to 15 per cent over the next 12 to 18 months remains unchanged.
In July, S&P Global Ratings weighed in, expecting house prices nationally to drop by 10 per cent from the onset of the pandemic until the market bottoms out, which is likely to be around mid-2021.