ANZ economists have significantly revised house price forecasts from a bearish 10 per cent decline to a 9 per cent lift in 2021.
The peak-to-trough decline will be limited to 2 per cent, with Perth set to benefit from a 12 per cent lift as Brisbane and Hobart follow with gains of more than 9 per cent now forecast.
Sydney prices are expected to rise at about the national average of 8.8 per cent, while Melbourne will continue to lag slightly at 7.8 per cent.
“Our view that house prices would decline around 10 per cent, peak-to-trough, has proven too pessimistic: low rates have trumped factors like elevated unemployment and low population growth,” Emmett and Timbrell said.
Stagnant population growth will continue to weigh on demand and place downward pressure on prices, however the RBA’s latest rate cut has proven a heavier offsetting factor as debt serviceability hits 20-year highs.
ANZ’s latest housing market update comes as auction clearance rates hit 75 per cent across all capital city markets over the weekend. A total 1,739 homes were taken to auction, compared to 2,590—at a 70 per cent clearance rate—the same time last year.
Sydney’s market performed well, according to Corelogic’s weekly figures, returning a 76.6 per cent clearance rate while Melbourne posted a strong post-lockdown result with 603 scheduled auctions returning a 73.5 per cent clearance rate.
Emmett and Timbrell said the momentum will continue as policy and lending support mitigates 2021 labour market risks.
“Owner-occupiers, and particularly first home buyers, are driving the market. Clearly a significant cohort of buyers with stable employment are keen to take advantage of historically low interest rates,” Emmett and Timbrell said.
Investor participation, in contrast, remained well removed from the 30 per cent-plus levels seen in 2015, making up less than 15 per cent of new loans, according to the ABS’ latest lending figures.
Emmett and Timbrell said that the impact of waning demand from investors and new migrants will hit the apartment market hardest.
“The overall weakness in the rental market is flowing through to investor demand, for both established and new housing.
“However, low rates and government stimulus are more than offsetting these negatives.”
“The recent announcement that the Victorian government will spend $5.3 billion on social housing will further lift activity, while news that a vaccine may be widely available by the June quarter will only increase confidence in the housing market.”
Meanwhile, CBA head of Australian economics Gareth Aird has indicated that the unprecedented amount of fiscal stimulus means the housing market is no longer a key source of risk.
Aird said the downside risks of lower net overseas migration and house price falls have “diminished materially”.
“It is clear that price falls will only end up being modest nationally. Indeed prices are now rising in most capital cities.
CBA updated house price forecasts in early September for a 6 per cent peak-to-trough decline and a strong rebound in prices in the second half of 2021.
“We believe the risks to our forecasts are skewed to the upside,” Aird said.
“Near-term momentum indicators of the housing market have continued to strengthen and our home price model is signalling that solid price rises could be imminent.
“We no longer expect dwelling investment to be a drag on the economy in 2021 and forecast growth in renovation activity to offset lower new construction.”