Capital city property prices are tipped to rise next year as a result of government stimulus, record low rates and changes to lending laws, according to a new housing report.
Released by SQM Research, Christopher’s Housing Boom and Bust Report 2021 suggests Perth is forecast to rise between 8 per cent to 12 per cent, as the base case forecast, on the back of the ongoing commodities market recovery and further mining project investment.
SQM Research managing director Louis Christopher says the city of Perth is tipped to be the top performer in 2021, followed by Sydney and Adelaide.
The base case forecast for Sydney is a 7 per cent to 11 per cent dwelling price increase.
Last month, ANZ economists significantly revised their house price forecasts from a bearish 10 per cent drop to a lift of 9 per cent, next year.
ANZ economists Adelaide Timbrell and Felicity Emmett also tipped Perth to benefit from a 12 per cent lift, with Brisbane and Hobart to follow with gains of more than 9 per cent in 2021.
Housing boom and bust report 2021: SQM
|ACTUALS||2021 Scenario 1 (base case)||2021 Scenario 4|
|City/Region||12 mnths to Nov 2020|
|Perth||+0.8%||+8% to +12%||+3% to +6%|
|Brisbane||+3.5%||+4% to +8%||+3% to +6%|
|Darwin||+2.8%||+6% to +9%||+6% to +9%|
|Melbourne||+0.7%||+2% to +6%||-3% to +3%|
|Sydney||+6.1%||+7% to +11%||+4% to +8%|
|Adelaide||+4.4%||+6% to +10%||+4% to +8%|
|Hobart||+6.4%||+3% to +7%||+1% to +3%|
|Canberra||+6.8%||+5% to +9%||+2% to +6%|
|Weighted Capital City Average||+3.5%||+5% to +9%||+2% to +6%|
^ Scenario 1 is based on Cash Rate at 0.1%. QE Expands, 3rd COVID-19 wave contained, JobKeeper extended to Sept Qtr 2020. Progressive roll out of Covid vaccine.
Christopher says the proposed NSW stamp duty and land tax opt-in for homebuyers will be a stimulus to the housing market in 2021.
“Importantly, an extension of JobKeeper is regarded as essential for the ongoing momentum of the housing recovery, which appears to have formed from the end of the September quarter 2020,” Christopher said.
“If JobKeeper is scaled back too prematurely, the housing market recovery in Sydney and Melbourne could stall.”
While state and federal government stimulus is expected to put a floor under Melbourne’s housing market, SQM says CBD units are expected to record ongoing price declines.
Melbourne is forecast to rise at a more subdued rate of between 2 per cent to 6 per cent as a result of this years extended lockdowns.
“It is likely that the housing market will gain further momentum on the back of increased investor activity, especially from those who seek some sort of income yield,” Christopher said.
“However, we have some misgivings on the longer-term consequences of these new stimulatory policies.
“If housing is regarded as an asset class that is not allowed to fall, Australia could have some rather serious social issues surrounding homeownership rates over the long term.
“Let’s keep in mind unemployment remains elevated and net migration is expected to be negative next year. We have a surplus of inner-city units in our two largest cities. And if there was another negative macro event in 2021, there is not much room left to cut lending rates further.”
Corelogic's dwelling price index for November shows the value of homes rose across every city and state.
Across combined capitals houses are up 1.1 per cent and down -0.6 per cent for units, according to Corelogic's monthly figures.
Wednesday's national accounts confirmed that Australia’s economic recovery is officially under way.
While technically, Australia’s recession may be over the economic recovery is not.
Gross domestic product grew 3.3 per cent in the September quarter, beating market expectations, but declined 3.8 per cent in the year to September.
This follows the 7 per cent fall in the June quarter.
And in its latest economic outlook report, the OECD has upgraded Australia’s economic growth outlook for 2020 by 0.3 percentage points.
It now expects Australia’s economy to contract by 3.8 per cent in 2020, previously 4.1 per cent.
This compares to an average fall of 5.5 per cent across all advanced economies.
The OECD noted that “the Covid-19 pandemic continues to exert a substantial toll on economies and societies”.
It expects global GDP will contract by 4.2 per cent in 2020, before picking up by 4 ¼ per cent in 2021.
^ SQM's 2021::Scenario 4 is based on no Vaccine released in 2021. International/State borders remain closed. Negative cash rate. JobKeeper/Seeker extended to end of year.