Big bank economists predict prices will start rising again next year
House prices should stay flat for the rest of 2023 and start rising again in 2024, according to a forecast from ANZ.
ANZ has upgraded its housing forecasts, spurred by a low supply of new listings and an increase in demand driven by higher-than-expected immigration, according to a report by The Australian.
ANZ senior economists Felicity Emmett (pictured above left) and Adelaide Timbrell (pictured above right) are the latest experts to forecast a turnaround in the housing slump, joining Westpac senior economist Bill Evans, who said last week that Australia’s housing correction was “largely over.”
Emmett and Timbrell pointed to improved auction rates, strong population growth and a recent rise in prices as factors behind their upgraded forecast.
“We now expect capital city housing prices to end this year unchanged before a modest rise in 2024,” they said.
Emmett and Timbrell had previously predicted that the sharp spike in interest rates would stifle house prices through most of 2023, with prices dropping 10% over the year. However, the economists now predict that the slump is largely in the rearview mirror, according to The Australian.
Low supply, rising demand
Emmett and TImbrell said that the impact of higher mortgage rates was being mitigated by low levels of supply and stronger-than-expected demand.
New listings are currently 20% below the five-year average, and total listings are at their lowest level since 2010, The Australian reported. Immigration is also spiking after the slowdown in 2020–21 when international borders were closed due to COVID-19.
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Emmett and TImbrell noted that the Reserve Bank’s repeated cash rate hikes had not yet fully flowed through to borrowers.
Fierce competition between banks has meant that average mortgage rates on new loans have risen nearly 50 points less than the cash rate so far, The Australian reported. The RBA’s rate pause this month has also given the market a boost.
“We did expect that strong household income growth and large savings buffers would provide a cushion for the fall in house prices,” Emmett and Timbrell said.
The economists stressed that any recovery would be slow and modest, The Australian reported.
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