ANZ forecasts end of Australia’s property boom

ANZ economists have released research forecasting that Australia’s once-in-a-generation property boom will end in 2023, with price nationally tipped to fall 4%. However, this fall will follow price rises of 21% this year and 6% in 2022:

ANZ property price forecasts

First, ANZ notes that affordability is becoming stretched, which combined with macro-prudential mortgage restrictions and rising listings will temper price growth:

Affordability constraints are biting, new listings have lifted strongly, and macroprudential tightening and higher mortgage rates are set to constrain lending over the coming year…

First-home buyers need to save more than 80 per cent of their annual wages for a deposit at the moment … even [cheaper rents] doesn’t change how hard it is to get over the deposit hurdle…

Deposit gap

Second, ANZ notes that owner-occupied mortgage growth is “rolling over”, which points to slowing price growth:

New lending finance to owner-occupiers has peaked: first home buyer finance has been trending down since the top in January, finance to other owner-occupiers has fallen 10 per cent over the past two months.

Mortgage growth

Third, new property listings in October are the highest in at least four years:

New property listings

Finally, and perhaps most importantly, ANZ believes that tightening macro-prudential mortgage curbs combined with rising fixed mortgage rates will offset any positive stimulus from rising immigration:

Rising immigration might provide a bit of an offset to dampening domestic demand, but we’re doubtful it will be enough given the evidence over the past two years that interest rates trump population growth when it comes to housing…

A further increase in the serviceability buffer is appealing given that it acts as a cap on leverage, and is relatively easy to implement,” noted the ANZ economists.

Also, the recent lift in high debt-to-income (DTI) loans has been a focus, but to avoid constraining some high-DTI borrowers that are actually low risk, combining DTI and LVR (loan-to-valuation ratio) restrictions looks another likely possible move in our view.

This analysis looks realistic and is broadly in-line with Westpac’s forecasts.

After an epic price boom of ~30%, it is inevitable that prices will then decline. The property market always moves in cycles.

Unconventional Economist

Comments

  1. TailorTrashMEMBER

    Also, the recent lift in high debt-to-income (DTI) loans has been a focus, but to avoid constraining some high-“DTI borrowers that are actually low risk, combining DTI and LVR (loan-to-valuation ratio) restrictions looks another likely possible move in our view”

    So does this mean if I have buckets of equity maaaate but no income I can still borrow up on a high DTI as I’m considered low risk . How does combining the LVR
    with the DTI work ? Does that mean even though
    I’m borrowing big on my no income it’s ok as long as I’m
    borrowing a smaller amount relative to the “valuation “
    of the pumped up crumbling pile

    All still looks awfully ponzi to me

    • exactly…. the bank is assessing the probability of getting the capital back (with interest). Achieving that via your income is preferred but if it has to come from your capital, so be it.

      That being said, the bank must be cautious, the bank still needs to be able to demonstrate that it reasonably believed you had the capability of meeting regular repayments, especially for a consumer loan else it risks having the loan contact throw out. So if a 25 yr old retail assistant inherits a $5m house, they cannot go and lend them $2m against it just because the is a very low likelihood of not recovering the capital. It’s why an aged pensioner can’t walk into a branch and easily draw equity on their $3m house.

      I would say the banks comment there is related to borrowers with more complex income arrangements and being able to use lower LVR’s to get around that.

  2. Hugh PavletichMEMBER

    New Zealand …

    Latest IPSOS NZ Issues Monitor … Housing still way out front at 54% as THE MAJOR concern ? …

    Ipsos NZ Issues Monitor October 2021

    https://www.ipsos.com/en-nz/ipsos-nz-issues-monitor-october-2021

    Our most recent Ipsos New Zealand Issues Monitor continues to track the key issues faced by New Zealanders and how these have changed over time.

    This report covers the following:

    • Performance of the government as perceived by New Zealanders
    • Ability of different political parties in terms of managing different issues
    • Top 10 issues: New Zealand vs Australia … read more via hyperlink above …

    Housing the top issue facing Kiwis despite pandemic and Labour most trusted to solve it … Zane Small … Newshub NZ

    https://www.newshub.co.nz/home/politics/2021/11/housing-the-top-issue-facing-kiwis-despite-pandemic-and-labour-most-trusted-to-solve-it.html

    Housing is the top issue facing New Zealanders despite the COVID-19 pandemic and Labour is the most trusted party to solve it – but their support is dropping.

    The latest Ipsos New Zealand Issues Monitor research shows Labour continues to be perceived as the party most capable of handling issues Kiwis are concerned about, but their lead has been falling through 2021.

    In November 2020, 47 percent of Kiwis believed that Labour was the most capable to manage the housing crisis, according to Ipsos, but by October 2021 it dropped to 32 percent, compared to National on 23 percent.

    Housing Crisis Solved ? … Don Brash … New Geography

    https://www.newgeography.com/content/007247-housing-crisis-solved

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