The ANZ has upgraded its housing market forecasts, tipping house prices to lift by 6 per cent next year before falling by 4 per cent in 2023 as the post-pandemic boom cools.
The bank is predicting the strongest gains will be in Brisbane, lifting by 9 per cent' Hobart, by 8 per cent; and Melbourne, by 7 per cent.
Sydney, where the median house price is a record-breaking $1.5 million after a 30.4 per cent surge, will moderate to 6 per cent next year before dropping by 4 per cent in 2023.
ANZ chief economist Felicity Emmett said affordability constraints and higher mortgage rates would mean that the gains in house prices over the past year would not be repeated in 2022.
“We expect housing construction to grow another 15 per cent by mid-2022, before activity brought forward by government incentives starts to dry up,” Emmett said.
The Reserve Bank of Australia recently reiterated its stance that the cash rate would not be changed until inflation is sustainably within their 2 to 3 per cent target range, implying a requirement for tighter labour markets and a “material” boost in wages growth before the inflation requirement is met.
ANZ said it expected the RBA to leave the cash rate— currently at 0.1 per cent—on hold until the first half of 2023.
APRA said the move aimed to reinforce the stability of the system and ensure borrowers could meet the level of debt they took on today and in the future.
“Another lift in the buffer or a measure which targets a combination of high debt-to-income and high-LVR loans is the most likely in our view,” Emmett said.
“But financial conditions are already tightening and the market may do some of APRA’s work for it.
“Indeed, the rise in fixed mortgage rates over the past few weeks may see lending slow enough to obviate the need for further macroprudential measures.”
The total value of residential real estate in Australia is now worth a record-breaking $9.1 trillion—almost a third more than all superannuation, the ASX and commercial real estate combined.
Low interest rates, which have propelled market growth, and the increase in housing prices has since pushed up the level of debt Australian homeowners have entered into.
Corelogic head of research Tim Lawless said any early lift in interest rates posed additional downside risk for housing values as well as the economy as a whole.
“We are already seeing the rate of house price appreciation ease due to affordability pressures, rising stock levels and, as of November 1st, tighter credit conditions,” Lawless said.
“Once interest rates start to lift, there is a strong chance that housing prices will head in the opposite direction soon after.”
Last month, Westpac updated its forecasts with similar expectations for housing prices to lift by 8 per cent next year before moving into a “correction phase” and dropping by -5 per cent the year after.
Harcourts Australia chief operating officer Lisa Pennell told The Urban Developer the plethora of forward predictions, despite their “good intentions”, usually failed to hit the mark, as the market is “inherently difficult to forecast”.
“Never would this uncertainty be greater than in the midst of a global pandemic with so many variables at play,” Pennell said.
“Almost 18 months ago the popular predictions were for a major crash—so we would not hazard a guess on what may or may not happen two years down the track.
“What we can say is that while supply has increased post NSW and Victoria lockdowns providing more opportunities for buyers who’ve been waiting in the wings for some time, demand remains healthy and we expect to trade strongly throughout the remainder of the year.”