Prices expected to rise 5% in 2024
Australia’s house price slump is “largely over,” according to a new forecast from Westpac.
However, Westpac chief economist Bill Evans warned that the housing market will still be at risk in the near term, with a sustained price recovery not forecast until next year, The Australian reported.
Westpac had previously predicted that prices would drop a further 7% this year, according to The Australian.
“Australia’s housing correction is largely over, several factors combining to produce a stabilisation,” Evans and senior economist Matthew Hassan said in a market update Monday. “Prices now expected to lift 5 per cent in 2024, revised up from +2 per cent.”
Evans and Hassan said that market stabilisation was being driven by increased migration, rising construction costs and a lower level of supply.
House prices stayed flat in February, rose 0.8% in March and are set for a similar gain in April based on data for the month so far, Westpac said.
The bank has revised its forecast to predict a national peak-to-trough decline in house prices of 10%, down from the 16% decline the bank previously predicted, according to The Australian.
“Further rate cuts and an improving economic backdrop will see momentum carry into 2024, although affordability is likely to constrain upside prospects,” Evans said.
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The price gains so far aren’t consistent – they’re concentrated around Sydney, with “upper tier” markets leading the way, The Australian reported. However, all major capital cities have either seen prices stabilise or posted small gains over the past three months, Westpac said.
Auction clearance rates have also risen to return to long-term averages. Turnover also appears to have stabilised, according to The Australian.
“Another major slide seems unlikely, although gains will be hard to sustain given interest rates and wider economic headwinds,” Evans told the publication. “A May rate hike is likely to ‘check’ the improvement in housing-related sentiment in the near term. Some lift in ‘on-market’ supply is also likely to test the depth of demand.”
Evans said the main risks to the housing market relate to inflation, especially if failure to control inflation spurs the Reserve Bank to resume hiking rates later this year, but also if continuing high inflation prevents the central bank from easing policy next year, The Australian reported.
“Both developments would clearly undermine housing market improvements and could potentially lead to a reversal,” he said.
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