House prices will continue to rise

A new report released from ANZ Bank predicts house prices at the national level will rise to a strong 17 per cent through 2021, before slowing to 6 per cent in 2022.

ANZ senior economist Felicity Emmett said she expected the Australian Prudential Regulation Authority (APRA) would then introduce macroprudential measures to slow house price growth into 2022.

ANZ reported that property prices rose a rapid nine per cent in the month of February, accelerating sharply from the 0.5– 0.6 per cent gains over the previous three months.

Strength was evident across all capital cities, with Hobart (+2.4 per cent) and Sydney (+2.3 per cent) the strongest and Adelaide (+0.8 per cent) and Darwin (+0.9 per cent) making the smallest gains.

Daily house price data suggest the gains in March will be even stronger.

Prices are now above levels seen in February 2020 (before the real onset of the pandemic) in all capital cities bar Melbourne where prices are down 1.5 per cent y/y.

Owner-occupiers are driving the market with new housing loans up 80 per cent since the low in May.

ANZ believes buyers are taking advantage of historically low-interest rates, particularly fixed rates, as well as various government support programs.

First home buyers are also benefitting from government support in the form of first homeowner grants and reduced stamp duty.

Investor activity is also growing strongly (+62 per cent from the low in May), but given earlier weakness, its share of total new finance remains low at 16 per cent compared to an average of 25 per cent over the previous decade.

The strength in sentiment is putting upward pressure on prices, with low stock levels adding to the fear of missing out (FOMO) sentiment emerging in the market.

ANZ now expects price gains of around 17 per cent across the capital cities (up from their previous forecast of 9 per cent) in 2021.
With interest rates the primary driver of price gains, ANZ sees strength across all capital cities and regions.