Major banks have changed their predictions for Australian housing prices, with one picking the year they will actually fall.
Economists have revised their predictions for residential property prices, including when they will stop rising and actually fall, while a real estate investment company says there will be a rush on a certain price band as interest rates start to climb from historic lows.
Australian dwelling values rocketed 22 per cent in the past 13 months, CoreLogic data shows, and are tipped by National Australia Bank’s economics team to hit 23 per cent by the end of this year.
The team has upgraded its forecast for 2022 after previously tipping a 3.6 per cent rise and now expect about 5 per cent as the impact of low interest rates and strong income support during the pandemic begin to fade, NAB group executive of personal banking Rachel Slade told NCA NewsWire.
ANZ senior economists Felicity Emmett and Adelaide Timbrell agree the double-digit gains in house prices over the past year won’t be repeated in 2022, with recent weakness in housing finance suggesting price growth will continue to ease over coming months after peaking in March.
“Affordability constraints are biting, new listings have lifted strongly, and macroprudential tightening and higher mortgage rates are set to constrain lending over the coming year,” they wrote.
They flagged average capital city housing prices will rise just over 6 per cent in 2022 and fall by about 4 per cent in 2023.
Interest rates will be the key, they say, rejecting the view held by many that the Reserve Bank of Australia may bump up the official cash rate next year as inflation rises faster than expected, which the central bank has also attempted to hose down.
“We see the RBA on hold until the first half of 2023, but fixed mortgage rates are already rising,” Ms Emmett and Ms Timbrell wrote.
Meanwhile, investment property company Wealthi says that as interest rates start to creep up, there will be a shift in demand for dwellings priced at $700,000-$800,000.
“We’ve seen some crazy prices despite the lockdowns this year,” co-founder Domenic Nesci said.
“But we are starting to see some signs that people may not want to buy a property that’s over $1m.
“People will be looking for more value and affordability.”
He said the gap between house prices and apartments and townhouses had been large this year but may be closing as more people look to buy into smaller, more affordable dwellings.
Also this week, analytics company Equifax expressed concern about rising mortgage values, calculating the value of new housing loans had rocketed by 70 per cent over the 18 months from January 2020 to July this year.
“It is worrying that mortgage limits are growing at a rate faster than most homeowners’ ability to service their loans,” general manager advisory and solutions Kevin James said.
“Disparities in the cost of living and the housing market opportunities in each state continue to be key contributing factors that are pricing mortgage borrowers out of the market, particularly in NSW and Victoria.”
But encouragingly, prospective homeowners appeared aware of the challenges of meeting their repayment schedules and were taking steps to improve their financial situation, cutting out credit cards, he said.
That was even before the Australian Prudential Regulation Authority last month tightened home loan rules – raising the “serviceability buffer” to reduce the maximum borrowing capacity.
CoreLogic’s Eliza Owen digested this week’s wage index figures showing a 2.2 per cent annual uplift, saying that was a return back to pre-pandemic levels – just shy of the decade average growth of 2.4 per cent – but housing price rises had clearly vastly outstripped the increase in salaries.
“While wages increased 81.7 per cent in the past 20 years, Australian home values have grown 193.1 per cent,” Ms Owen said.
Originally published as NAB upgrades 2022 housing price predictions, ANZ predicts fall in 2023
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