Here’s NAB’s Residential Property Survey Q4-2021 released on 4 February 2022. “The view from NAB…
With our view on rate hikes coming forward, we now expect the turning point in property prices
to occur in the second half of 2022”. We can see in their Hedonic Dwelling Price Forecasts Table,
in 2021, prices soared by an average of 21% in the capital cities. It was actually Hobart that
increased the most at 28.1% and Brisbane second at 27.4%. However, in 2022, NAB predict that due
to interest rate hikes, price rises will soften quite substantially with an average of only 2.7%
price rises. But as rate hikes take their toll, they suspect in 2023 that prices will fall quite
dramatically by an average of 9.3% with Sydney and Melbourne worst off with predicted falls of 11.4%.
The Commonwealth Bank have a similar outlook with Senior Economist Belinda Allen saying that,
“The marking is heading towards a significant cooling. We have already seen fixed-rate mortgages
move higher in recent months as well as the implementation of the higher interest rate
serviceability buffer by APRA on November 1, 2021. Both will assist in cooling the market.”
According to Westpac’s Australia and New Zealand Weekly, week beginning 14 February 2022,
dwelling prices are expected to decline by 14% from late 2022 through to the end of 2024. “Our
recent changes to the outlook for interest rates have material implications for our forecasts for
Australian dwelling prices. In January we moved to the view that the RBA would begin its tightening
cycle earlier and hike rates further, the cash rate forecast to begin rising in August 2022 to
a peak of 1.75% in March 2024. The shift brings forward the timing of an anticipated correction
phase for housing markets and means it will extend into 2024. Despite some further gains near term,
Westpac expects declines later in the year to see dwelling prices post a net gain of just 2%
over 2022. Prices are then forecast to fall 7% in 2023 and a further 5% in 2024,
stabilising towards the end of that year”. In conclusion, “Overall, our revised profile would
mean a peak to trough movement in prices of 14% over 2½ years. In level terms,
this means prices at the end of 2024 will be on a par with their level in April last year”. Here’s
their Dwelling Price Forecast table. They predict slower growth in 2022, significant falls in 2023,
and smaller falls in 2024. However, as they stated in their conclusion, this only brings
us back to price levels that we saw in April last year, only 10 months ago. So we have to wait 2½
years to go back 10 months? It doesn’t seem so amazing, does it? And we also have to remember
that these are all only predictions. As we know from previous predictions, they’re usually wrong.
Here’s some news from the ABC from 13 May 2020. “CBA warns Australia risks 32%
house price crash in a 'prolonged downturn'”. Sydney Morning Herald from May 13, 2020,
“Banks warn house prices could fall up to 30% as rental vacancies surge”. “House prices could fall
between 11 and 32% by the end of 2022 depending on the growth of unemployment during the downturn,
according to Commonwealth Bank modelling released on Wednesday. The Sydney-based bank holds more
mortgages than any other financial institution in Australia”. Okay, to be fair to them,
2022 hasn’t finished yet, so there’s an outside chance they could still be right,
but not only would the market have to lose the 32% they predicted, it would also has to lose all of
last year’s gains of 20 to 25% which they didn’t predict for a total of what? About 50% falls this
year? Obviously, that’s not going to happen unless there’s some major unexpected event.
What do you think, are any of these predictions
probable? I ran a poll yesterday asking that very question. 72% of you replied that “Yes,
House prices are far too high. A crash is inevitable”, while the remaining 28%
replied, “No. The doomsayers are almost always wrong. House prices go up!”.
What do you think? Are house prices in Australia destined to go
up and up and up? Or are we just waiting for an inevitable collapse? Let me know below.