Due to “distressed sales”, Westpac is predicting that there will be a 15 per cent increase in house prices in late 2021.
The economists who work at one of Australia’s biggest banks have announced their predictions for late 2021 – and it is said that prices will increase due to an anticipated rise in vacancy. The decrease in vacancy rates is due to current weak immigration.
In March earlier this year, Bill Evans, chief economist at Westpac, and Matthew Hassahad, senior economist, expressed their anticipation of that, between April this year and June next year, property prices would decrease by 10 per cent. This is a significant drop in dwelling prices.
However, they have now expected a 5 per cent drop rather than a 10 per cent drop. This change is due to unexpected resilience at capital city markets in relation to the current recession.
They have also stated that, from their predications, property prices will have a 15 per cent rebound in the two years that follow June 2021.
The two economists wrote that “we are much more optimistic about the pace of price appreciation over the following two years.”
While it is anticipated that, over the last few months of 2020, dwelling prices will progress fairly stable, however, this could change. In Melbourne, due to current issues, they could significantly fall behind the other states within Australia by experiencing falls around the December quarter.
While this is not good news for Victorians – there is worse. Due to their current situation in Melbourne and some part of regional Victoria, it is very possible that thousands will not have the funds to pay their ongoing mortgages or business loans when the loan repayment holidays end.
The potential failure to pay their loans could lead to a significant increase in sales that are “urgent and distressed.”
They continued, stating that “the main impact on the housing market during this phase is via an increase in financial distress that sees urgent sales act as a catalyst for weaker prices.”
“The fourth phase will come once this selling pressure has worked through the system and prices lift again.”
The continued support from state and federal governments will help the recovery substantially. By sustaining low-interest rates, which could still be lowered even further in the coming months, state and federal governments can increase the affordability of property and help the economy recover its strength.
Evans and Hassahad wrote that it is entirely possible that a proven vaccine could substantially boost the recovery – if it becomes available within the next few years.
It has been calculated that there is approximately $240 billion worth of payments on pause right now. Almost 630,000 small businesses and housing loans have been paused without the requirement of repayments to help those who are struggling due to the current restrictions.
Fitch, an Australian rating agency, has predicted that, over the next twelve to eighteen months, property prices will fall by an approximate 5 to 10 per cent. According to Fitch, this fall will be caused by the continuing weakening of net immigration.
Fitch has also released that the population is expected to only grow by 0.7 per cent over the next year, which is a percentage that has not been seen in Australia in approximately 40 years. This number is also a 1.4 per cent decrease from the previous year.
The agency has stated that “the reduction in immigration between FY19 and FY21 would imply demand for around 76,000 fewer dwellings than would have otherwise been the case.”
Further, the global situations have allowed fewer and fewer young adults to move out of their parent’s homes and into their own dwellings, which is a significant hit to property demands within Australia. This decrease is also being affected by the uncertainty within the jobs market, which is worsening due to the recession.
Westpac expected that, between April and June of 2021, the property market will drop by a further 12 per cent within Melbourne. In comparison, the property within Sydney is only expected to drop by approximately 5 per cent. Brisbane’s property market is expected to be hit by only a 2 per cent decline. Perth is not expected to decline at all, rather, it will remain flat. However, Adelaide is expected to have an increase of 2 per cent over this period.