Like many of us, ANZ has reversed its property price forecasts for 2021 and now expects strong price growth, driven by the smaller capital cities:
Since our last forecast, fixed rates have moved down substantially — the amount of interest people are paying on fixed-rate mortgages has approximately halved over the past year and a half.
These factors seem to be offsetting weak fundamentals of high unemployment, very low population growth and a fractured rental market.
An early vaccine rollout and the resulting lift to sentiment could drive larger price gains than we currently anticipate (in 2021).
That said, we think regulators would be quick to step in with macro prudential measures if the market looked be overheating.
Nationally, ANZ now expects prices across the combined capitals to grow a little for the rest of 2020 and by 9% in 2021.
Turning to the capitals, Perth values are forecast to surge by 12%, Brisbane by 9.5%, Hobart by 9.4%. Sydney prices are forecast to rise by 8.8% and Melbourne’s by 7.8%.
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Certainly, momentum has shifted across the property market. Mortgage rates continue to crater (as the RBA the banks’ borrowings), mortgage restrictions are easing, there is an abundance of fiscal stimulus across the economy, and mortgage deferrals have been ‘extended and pretended’. These factors have well and truly overwhelmed the collapse in immigration and persistent high unemployment.
The smaller capitals, which were already reasonably priced, offer good rental yields, and are far less reliant on mass immigration, look set to lead the charge in 2021.
I am especially bullish on Perth and Brisbane property.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
