NAB improves 2022 house price forecast, ANZ chooses year to fall

The big banks have changed their forecasts for house prices in Australia, with one choosing the year in which they will actually fall.

Economists have revised their forecasts for residential property prices, including when they will stop rising and actually fall, while a real estate investment firm says there will be a rush on a certain price range as interest rates start to climb from their historic lows.

Australian home values ​​have climbed 22% in the past 13 months, according to data from CoreLogic, and the National Australia Bank’s economics team estimates it will reach 23% by the end of this year.

The team has improved its forecast for 2022 after previously announcing a 3.6% increase and now expects around 5% as the impact of low interest rates and income support during the pandemic begins to grow. fade away, said Rachel Slade, director of personal banking services for the NAB Group. NCA NewsWire.

ANZ senior economists Felicity Emmett and Adelaide Timbrell agree double-digit gains in house prices over the past year will not be repeated in 2022, as recent weakness in housing finance suggests price growth will continue to slow down over the next few months after peaking in March.

“Affordability constraints are severe, new listings have risen sharply, and macroprudential tightening and rising mortgage rates are expected to constrain lending in the coming year,” they wrote.

They reported that average house prices in the capital would rise just over 6% in 2022 and fall by around 4% in 2023.

Interest rates will be the key, they say, dismissing the view of many that the Reserve Bank of Australia may raise the official treasury rate next year as inflation rises faster than expected, which the central bank also tried to reduce.

“We see the RBA on hold until the first half of 2023, but fixed mortgage rates are already on the rise,” Ms. Emmett and Ms. Timbrell wrote.

Meanwhile, real estate investment company Wealthi says that as interest rates start to climb, there will be a change in demand for homes priced from $ 700,000 to $ 800,000.

“We have seen insane prices despite the lockdowns this year,” said co-founder Domenic Nesci.

“But we’re starting to see signs that people may not want to buy a property over a million dollars.

“People will be looking for more value and affordability. “

He said the gap between house prices and apartments and townhouses has been significant this year, but could narrow as more people look to buy smaller, more affordable homes.

Also this week, analyst firm Equifax expressed concern about rising mortgage values, calculating that the value of new home loans climbed 70% in the 18 months from January 2020 to July of this year.

“It is disturbing that mortgage loan limits are increasing at a rate faster than the ability of most homeowners to repay their loans,” said Kevin James, general manager of advice and solutions.

“Disparities in the cost of living and housing market opportunities in each state continue to be key factors pushing mortgage borrowers out of the market, particularly in New South Wales and Victoria.”

But it’s encouraging to see that potential homeowners seemed aware of the challenges of meeting their repayment schedules and were taking steps to improve their financial situation, by cutting credit cards, he said.

This was even before the Australian Prudential Regulation Authority tightened mortgage lending rules last month – increasing the “service buffer” to reduce maximum borrowing capacity.

Eliza Owen of CoreLogic digested this week’s salary index figures showing an annual increase of 2.2%, saying it was a return to pre-pandemic levels – just below the decade’s average growth of 2.4% – but house price increases had clearly outpaced wage increases.

“While wages have risen 81.7% over the past 20 years, Australian home values ​​have increased 193.1%,” Ms. Owen said.

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