Moody’s: Aussie house prices to surge 12%

Moody’s, in association with CoreLogic, has released dwelling price forecasts, which predict that Australian house values will rise by around 12% over the next two calendar years, whereas apartment values will rise by around 10%:

The RBA is being forced to do the heavy lifting to get the economy out of its funk. This could trigger a pickup in the Sydney and Melbourne housing markets that is more aggressive than forecast…

Our long-held baseline forecast—that the trough in the national housing market has occurred—is evident in improving activity in the Sydney and Melbourne markets, where 60% of activity takes place. Improved auction clearance rates in these cities, alongside the return of monthly dwelling value growth, according to CoreLogic data, support the outlook for ongoing improvement.

The housing market has been particularly responsive to the RBA shifting to an easing bias, which is expected given the close causal relationship to lending rates. Much of the strength in house prices and construction during the most recent boom was thanks to the decline in nterest rates…

Sydney’s housing market has started to emerge from its correction (see Table 2)… House values will fall an average of 8.4% in 2019… The correction in Sydney is forecast to have largely passed by 2020, but home value growth will be far from the lofty gains of recent years. Housing values are forecast to rise by an average of 7.7% for houses and 7.9% for apartments…

Greater Melbourne house values have started showing signs of a recovery in the third quarter but remain 12.5% below their peak… Overall, Greater Melbourne house values are expected to pick up by 7% in 2020… Moreover, house values are likely to gain further momentum in 2021
and expected to rise by 7.8%… A similar, fast-paced recovery is expected for unit values in Greater Melbourne…

This is strange and outdated analysis by Moody’s. According to CoreLogic, Sydney and Melbourne dwelling values are already in positive territory in 2019, with the 5-city index also nearing positive territory:

For what it is worth, MB’s forecasts are contained in our Q3 Subscribers’ report, which was released earlier this month.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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Comments

  1. I’m just thinking of that fat equity cushion I’ll be sitting on. Can’t wait lol… Ok but seriously. How prices are going to rise on the back of a flogged out Economy I don’t know…

  2. I read this as an indication that previous spruiking has not been sufficiently successful to goose the market.

    Smells of desperation ………

    • Patience, my friend. In time, the market will seek you out…. 8% rise in 2020, 16% rise in 2021, 32% rise in 2022 and 64% rise in 2023….

  3. LOL
    what a pile of crap
    north shore houses will increase 3% but northern beaches 18%
    north shore units will increase 5% but northern beaches 20%
    LOL
    they probably dehydrated from licking their finger so much

  4. What is the value of these forecasts? Seriously. It has all the hallmarks of some senior peanut at Moodys giving a task to a junior employee for want anything better or more useful to do. There is no context either — will this forecast be valid in the face of a global recession?

    Useless.

    Not content with being a [email protected] and conflicted ratings agency they now read tea leaves

    • Whether a forecast is valid or not is beside the point. The 99.9% will not remember an ancient forecast when the time comes anyway so the 0.1% can safely move onto a new forecast.

      No, the point of this exercise is to shake the tree – shake the last stubbornly clinging bit off the tree – to probe the entry point for shorts. After all, both the top and the bottom of a market are marked by stubbornness. At the top, the market refuses to go up while wonderful news keep coming out. At the bottom, the market refuses to go down while terrible news keep coming out.

    • The reason for my above comment is that I think this spruik is about NOT SELLING over the FOMO buying message that we have been used to. They cant get enough buyers so they need to have less sellers.

      • I hadn’t thought about it like that, perhaps because I don’t credit institutions like Moodys for being that Machiavellian.

        I see them more as dumb plodders — but you could be right. They could be with the ‘insiders’ on this. Part of the machinery desperately trying to keep this leaky ship afloat.

  5. ErmingtonPlumbing

    On a 1.5 million dollar house that’s 180k.
    What’s the best bang for buck 7 seater in that price range fellas?

  6. SupernovaMEMBER

    Yes what a pile of crap…..the following according to Fitch’s latest: “Australia’s household debt at 191.1%of disposable income in 2Q19 is among the highest of AAA rated sovereigns and poses and economic and financial stability risk in the event of a shock and that newer borrowers and financially weaker households could be vulnerable. Australia’s net external debt remains among the highest within the AAA category with heavy reliance on external funding.” Fitch forecast Australia’s surplus to be short-lived as iron ore prices decline.
    Australia’s reputation for auditing is also coming under attack and quite possibly extends to the valuation of house prices. With such low sale volumes how truthful is the information Moody’s receives from CoreLogic?

    • There’s been a substantial increase in stock in the last few weeks, and the market has continued to rise. Don’t kid yourself, at least in Melbourne and Sydney we are in a bull market.

    • Jumping jack flash

      An extra 7 trillion debt dollars pumped into the economy by 2030 will give us a similar effect as what happened in 2000 to 2007.

      They desperately want to get back to this golden age of debt.

      191%?? Pfft. A doddle. We’ll be at 291% by the end of it and still going strong!

      No risk, mate. Our houses are golden and worth whatever we say they are.

      • All I know is that for many years those on this site have been chronically predicting property slumps while houses have for the most part in Melbourne and Sydney appreciated significantly. Better to make money than to cling on to the never-ending hope of a property crash.

  7. Awesome I talked the wife into selling our Brisbane home. It won’t be till Jan Feb but she FINALLY agreed let’s flog it because we are moving back to US in Dec

    • I knew this would happen, just not sure how long it can last. I suspect it will be short lived (12 months max).

      • Not sure Gav… In the process of my capitulation to buying, I’ve come to accept there may be no limits to this madness. Eg. negative IRs, QE of junk RMBS, 5% deposit scheme expansion to all FHBs etc, to further pump it to the stratosphere. One day it will all come crashing down, and the govt will bail all taxpayers in to rescue the banks/ dumb punters.

  8. John Howards Bowling Coach

    I am not convinced that the market is actually rising overall, the feeling in the economy is still very poor.

    In essential markets like grocery food the job market is dead according to a couple of people I know who have been made redundant and are looking for work.

    I understand that the top end, which fell off the most might be coming back due to some bargain hunters jumping back in to spend on a high end house. However I think the figures for origin (not refinancing) loans will give us a better view. Yes there are a lot of Chinese for example who have cash to buy without finance, but for what we want to look at, the everyday market, most buyers engage in finance, especially those entering the market (either new buyers or speculators).

    While most people in Australia still only really see value in owning real estate, I don’t feel that the feeding frenzy has resumed at the moment, it still feels that the economy has the hand brake on.