ANZ: Aussie property prices to boom

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%.

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.

Unconventional Economist
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Comments

  1. Any anecdata out there?

    Friends went to auction two weeks ago, low-mid 1s range, 4 bedder close to the beach in Melb. Everything had been selling strong right through Covid and I figured they’d offload it very easily. Passed in, not reported anywhere. Suspect they’ll still find a sucker.

    • We live in 3185- near beach, 8 k from city.
      Been half a dozen really nice houses up for auction in the last couple of months
      – I’ve been in most of them( sticky beaking or school network).
      – well positioned, well renovated, would have sold like hot cakes 2 yrs ago.
      – all passed in, all up for sale( 1 for 4-5 months at least).
      Last one I know sold was in Elster avenue. Had been up market rental, well looked after, sold in March to price undisclosed( but well below what owner wanted apparently according to local source).
      Quite a few nice rentals around us too- unit and townhouse stuff. Compared to last time I looked 6-7 years ago, rents down 20-25%, and the properties in better shape than then. Some with boards out front , many empty but no board- wonder if some will go to auction if no tenant found.
      One place looked as though the tenants just walked, given the amount of stuff that dribbled onto the nature strip.
      And it’s all very quiet- Coles is quiet, some cafes are funereal, others just quiet, lots of townhouses and houses where people seem to have gone away.

    • Everything had been selling strong right through Covid

      Sorry mate that is 100% absolute hog wash – nothing in Melbourne has been selling – barely a sale.

      For a long time listings really pulled back – but last month or so it has absolutely UNLEASHED – while sales are still in the gutter.

      Melbourne is in serious trouble – massive problems.

      Not sure who you’re trying to convince with that spruik but its just laughable.

      • The fake ‘data’ messes with the picture too, it’s deliberately opaque. Stamp duty receipts may be the only objective information. State budget next week – let’s see.

  2. Jumping jack flash

    It was an almighty can kick but will it be enough to reignite the Debt Engine of the New Economy?
    The debt certainly seems to be growing fast enough at the moment to be able to feed back into repaying itself plus its interest, create the capital gains, and leave some left over to inflate consumption and wages enabling a new round where debt quantities are increased.

    They’ll need to keep it up though, and to do that they need to stay the heck away from the interest rate lever when inflation starts jumping. Shouldn’t be a problem to leave interest rates alone since they decoupled interest rates from inflation a while ago.

    I expect inflation to rocket up very soon, possibly just around or immediately after Christmas. Food prices have already jumped supposedly due to COVID (it must attack crops too. Is there anything it can’t do?) . The prices of everything else will also jump. Hopefully some of that price increase gets into wages, which is likely to happen because hopefully enough capacity has been freed up from that can kick so we can move away from the last ten years’ scenario where every spare dollar was hoarded and used to obtain or service the necessary amounts of debt with, instead of being spent and/or put into wages. (In fact this was the very reason for wage theft)

    • Yes, Debt/Capital Gains might have increased enough to pay off the pass lot interest, as you say. But what will the lucky beneficiaries of those gains do with them? Stick them in the bank at 0%? Buy a bigger car, and the purchase price will get recycled back the car dealer who will do what with the proceeds? Stick them in the bank at 0%? Start another business?
      Nope. It’s all going into one of two place – stocks and property, where it will lock itself up again.
      So what’s the point?
      Answer: There is only one – we are so far gone that there is no alternative.
      It will all end, of course, one day, when we look at the 10 trillion dollar note in our scrapbook; the very note that wouldn’t even buy us a loaf of bread when it was needed. But until then, kick that can for all its worth.
      We could have put a stop to this madness in 2008, but we didn’t.
      Oh, well…..

      • These bloody idiots have overcooked the economy big time.Each country is doing it of course but it is not homogenous and I suspect the countries that are least affected by the virus(Australia being one of them)and particularly if they import alot of stuff are going to have serious inflation

  3. for anyone interested in real estate prices elsewhere…….

    https://ryazan.cian.ru/sale/suburban/238426050/
    250 grand Australian will get me this joint with 2 pools (inside and outside) and 2 saunas (why? who knows?) on 1800 metres about 5 minutes drive from Ryazan (circa 2-3 hours from Moscow)

    the same amount will get me this joint about an hour from Moscow
    https://ramenskoye.cian.ru/sale/suburban/237822871/

    a touch more will get me this joint – a 640 metre behemoth on 2800 metres, about an hour out of Moscow.
    https://ramenskoye.cian.ru/sale/suburban/237000268/

    Part of me is wondering if I should sell out of any surge in Oz RE and simply bail. I dont actually need to be in Moscba, one of those joints would do me fine. The only thing that would drive me crazy would be Russian drivers and the weather over winter.

    • Good luck with getting family home.
      Luckily I managed to persuade my partner to abandon ship in uk before his job finished there( I squared it with employer), and he got one of the last flights back.
      He thought I was joking/ exaggerating the problems, but he watches the line of people unable to get home with a little more gratitude these days.

    • rob barrattMEMBER

      Well, as long as they’re not big enough to attract the attention of an associate of one of the ruling oligarchs. You might be getting a visit from a small group of uniformed chaps asking politely for the deeds…

    • I believe you speak Russian. I hear these days it’s difficult to even get a visa without speaking Russian. In the future it could be a good passport to have. Thanks for posting those and the last time you did, it’s certainly good to see to temper the idea (particularly posited by those who have sold out) that Australia is reasonably priced.

    • Fred Yellowstone

      Heard a third hand cautionary tale about buying overseas, in this case Spain.

      Australian couple bought a villa somewhere near Barcelona, small village may be 1 hour drive, looked nice, great price. UK firm with Spanish office did the legals and all was well.

      Until they set up there, and within a few weeks got a visit from a couple of local blokes explaining that the previous owner (i.e. the vendor to them) owed them money. Frantic check back to lawyers: they said title clear, no mortgage, legally nothing owed.

      Local blokes don’t really care about legal formalities etc – the previous owner owed them, and so they want money or ‘house not safe to stay in’. RE agency not interested and cannot contact vendor because ‘went overseas’. Situation getting desperate as blokes keeping coming back, sometimes after dark. Local police very very lethargic to do anything. Had to get lawyers (at some cost) to escalate it to provincial police inspector or some such to get some action. Very unpleasant experience all round.

      Not saying this would happen in Russia, but would always be wary in a small village overseas.

  4. Pretty crazy prices where I am for houses (2093 Sydney). Not a lot selling/on the market but the prices are crazy and most things selling before auction or if they don’t go at auction they are listed at ridiculous prices and sell. I’d say ~10% up YoY. Apparently lots of people moving over from the inner west.

  5. In my area and where I’m looking.. prices are sky high, but not a lot on stock AND also, they are selling before auction. So vendors are not waiting for auction day.
    So I feel like there is asymmetry in information. Vendors thinking the thing will crash any minute and buyers thinking it’s going to boom any minute.

  6. innocent bystanderMEMBER

    well it is ok for everyone to reverse their positions but it would be good to know why they were wrong and why they have changed. looking at rear vision data is one thing but reading the momentum is another.
    there was plenty of anecdata on here over the last few months about the smaller capital cities and regional areas.

    so, if low mortgage rates was the ammunition and covid19 was the trigger how often can that trigger be fired?
    what will stall the upsurge?
    FOMO still strong in some Perth areas – one property I know was on-sold during the 60 day settlement period.

    • Article on Indaily this morning, reckons the 4000 expats returning every week are replacing the lost immigration demand. Plus large number of people leaving the big pop. states for smaller ones. There’s your demand.

      • The Australian real estate market has built this year alone houses for 400,000 migrants. Along side of this we have a shortfall of tourists, business travellers, students etc around 300,000, we already had an excess of apartments and housing stock – you would literally have to triple your numbers to make any dent in housing demand vs supply.

        The only thing doing well is the spruik.

        Its laughable how people are responding.

        • peterbruceMEMBER

          All I know is that I have been closely watching the re market where I live.(south coastal Adelaide) and it started in March and still is gangbusters, values up at least 10%, crowded opens, quick sales. I don’t know where the demand is coming from. Do you?

          • The demand doesn’t exist, at least in his world view. The cognitive dissonance doesn’t allow him to even register that it could possibly be so.

  7. Hill Billy 55MEMBER

    Amazing that its not being shouted from the rooftops. The Corelogic quarterly index at the 5 capital city level has finally turned positive (up .01%). With all the shenanigans going on one would think that this would be major news of the day – LOL!!!!

    • Record breaking over supply of housing and apartments – 5 Billion in government accommodation, 400,000 migrants who did not arrive, no tourists, no students, no business accommodation – over supply of houses and apartments is already going to outweigh demand for years.
      Depression level unemployment, demand, and economic activity – worst bush fires in history…..

      Bank puts out a statement saying things are “chipper” – everyone jumps on board saying MUST BE TRUE !!!!!

      Take one minute to actually look at the listings on domain – nothing selling, stock piling up, desperate listings ….absurd commentary at this stage – really is beyond the pale.

    • Forgot to mention 48% of our external trade with China just evaporated – all good – who needs an income……lols what a joke economic analysis has become in Australia.

      RBA pumps $200 Billion emergency funds into the banks and everyone literally thinks they are rich – and thats all that was needed.

      The mind boggles.

      Trade ? FX ? Debt ? No ? Nothing ? Crickets ?

      • Jackson I am sure that you understand that there is more than one housing market. The suburbs mentioned above are the nicer suburbs, where people already have money and where the returning expats are going. Added to that, the incentives and interest rates available are allowing people to upsize, invest and buy for the first time. During the virus months coastal properties have been doing very well, as have rural and rural residential homes. Suburban retail has performed strongly as has industrial, logistics, super markets and petrol stations. The markets you are referring to are the fringe suburban housing markets and the inner apartment markets, they have performed poorly. Also performing poorly are hotels, offices, shopping centres, aged care and residential development sites. There is no imminent crash in All Australian Property, just some sectors performing worse than others.

  8. 3 apartments in my street in sydneys east going to auction. 2 passed in with the 3rd having auction soon. Cross street from mine has 5 apartments in a row for sale! 3 passed in and 2 sold at auction. There is so much for rent as well. Rent down about 15% from year ago and taking months to find tenant. Just not seeing the bullishness in my area

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