ANZ has scrapped its forecast for a pandemic-linked 10 per cent drop in house prices and says a jump in sentiment based on stimulus measures and record-low interest rates will curb the decline and could even result in “modest” price growth this year.
It expects strong growth next year with estimates for Melbourne prices to be in the range of 7-8 per cent growth.
The return of owner-occupier buyers to the market – particularly first homeowners – was now likely to limit the peak-to-trough decline in home values that started in April to just 2.1 per cent nationally, and after a 1.7 per cent gain this year, prices were now likely to rise almost 8 per cent next year.
The decision by the third-largest mortgage lender to do away with its “too pessimistic” forecast follows the improved sentiment around housing that has been showing up in rising housing finance and auction clearance rates, spurred by the Reserve Bank’s rate cut this month.
Activity is picking up. Three-quarters of homes got sold at auction in the week to Sunday, as buyers chased properties in Sydney and Melbourne, boosted by record-low borrowing costs and significantly reduced stock.
But the call by Melbourne-based ANZ reflects the Reserve Bank’s latest, historic, rate cut to 0.1 per cent, the latest decline in the benchmark cash rate, which was “dominating” the house price cycle and had helped turn sentiment around sharply, the economists said.
Risks to the revised forecast were evenly balanced, they said.
“An early vaccine rollout and the resulting lift to sentiment could drive larger price gains than we currently anticipate.
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