ANZ turns uber bearish on Australian house prices

ANZ Bank had forecast in February that dwelling prices would rise by 8% cent in 2022, followed by a 6% decline in 2023.

However, ANZ says the prospect of aggressive monetary policy tightening means that it now expects dwelling prices to fall by 3% in 2022 and 8% in 2023.

ANZ economists have forecast the official cash rate (OCR) will rise to 2.35% by mid-2023, compared with 0.35% currently. This would equate to an average variable mortgage rate of 4.75% and would “significantly” reduce borrowing capacity.

From The AFR:

“Housing prices look set to turn lower in coming months,” the economists wrote.

“While fixed rates have already risen sharply, the steep increases in the cash rate will flow through to variable mortgage rates, lifting minimum repayments significantly and reducing borrowing power. Macroprudential tightening, solid supply and constrained affordability will also be headwinds for house prices.”

Below are the ANZ’s updated price forecasts:

ANZ house price forecasts

I believe the ANZ’s house prices forecasts are too optimistic if the OCR rises to 2.35% by mid-2023. Such an increase in the OCR would see Australian households experience their sharpest ever increase in mortgage repayments – a circa 80% rise – resulting in far steeper house price falls.

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Comments

  1. Sounds like they’re preparing their song sheets for the bailout (or bailin) routine coming soon

    • Strange EconomicsMEMBER

      Bailouts for borrowers are already in election promises,

      Super 40K per apartment for FHBs, at 5 times loan is another 200K for bidding the price back up.
      House prices to drop 0.0001% this year – what a crash .

      Next policy from LNP if back in –
      why not let anyone take out All their super $ 200K to pay mortgages.

      • Now that is some savvy stuff. Only a looser wouldn’t jump at that.
        Me n the missus could clean off the mortgage then plow truckloads back into super S/S.
        And of course when we sell (in 20 years) we would definitely, absolutely, super-duper put that money – plus some sort of compounded gain – back into super, for suresies. We definitely, absolutely-doodelly (everyone else loves Ned Flanders), would not use it on a mint beach side retirement place.

        Jesus. I’m talking retirement. I am getting old. That feeling when you refi to a new bank and they say how will you pay this off post retirement

      • I always thought there is so much $ in super they (govt) won’t be able to help themselves. Was thinking Aus share or Gov bond quota, not pissing it all on the housing bonfire, but there you go. What a country! ( I’m too old and can’t get a 2nd passport so I’m rooted)

  2. “There’s never been a better time to buy”

    However, ANZ says the prospect of aggressive monetary policy tightening means that it now expects dwelling prices to fall by 3% in 2022 and 8% in 2023.

    2024 will be a better time to buy.

  3. 11% nominal over 1.5 years = ‘uber bearish’ lol

    Very simple solution to loan serving issues. Much like speed limits in our little nanny states which have not been reviewed inline with changing road and car safety standards, perhaps the same goes for mortgage terms

    A mortgage term of 30 years has been available for decades while life expectancy and life potential has steadily increased, particularly if you delve beyond the average cohort (has a job, educated, access to health care etc.) Therefore, a 35 year loan term or even 40 years could be argued as perfectly reasonable? That would certainly help offset the cashflow impact of rate rises and would do so without impacting bank earnings (it would likely increase them as long as it prevents a major credit event).

    While a correction of asset prices appears inevitable, a full blown crash predicated on the authorities being ‘out of ammo’ is still quite possible but IMO has a far lower probability attached to it than many here want so desperately to believe.

    • Except the current prices are based on interest only 3 year fixed term fixed interest @ <3% based on liar loan applications. The Building bust due to spiralling materials cost paired with the sentiment change in the wake of rising interest rates is going feed back into employment, adding more distressed borrowers to the bonfire. And that's without the Fed breaking something and triggering a credit event. The only ammo left is super access, but the LNP just lost the election with their attack on wage increases.

  4. When will people except change? IR’s go up, people complain, they go down every one is happy (media), or is that the truth?

  5. Arthur Schopenhauer

    Mmmm 😋 , is that the smell of super pouring into the RE market?

    Or is that the future?

    • Property is like a drug, you will drain every last cent out of yourself, your friends and family to feed the addition, the outcome is always the same. The govnuts have little left to provide the honey pot, super is the last honey pot to tap.
      When that has been tapped, they will say, who could have thought that the outcome is not what we thought.

  6. working class hamMEMBER

    Super used to pay the mortgage is the next step. Most people do it already when they retire.
    You can still use SMSF’s to buy property of yourself, draining the industry super funds of cash is a given.

    • You can still use SMSF’s to buy property of yourself,

      If you’re talking about residential property, not while it is in the SMSF you can’t

      • Ian ArunMEMBER

        Yes technically you can’t however if you have another person living in same suburb…there are work arounds

        • If you can’t live in it, and it’s subject to arms length transaction, then what’s the point of this?

          If you’re motivated by having it be an in-specie benefit paid at a condition of release, you may as well invest in other things, and buy a property outright at retirement.

    • Frank DrebinMEMBER

      Or you just allow your super balance to serve as an offset against a mortgage.

      No need to withdraw funds and the banks loan books are suddenly less risky. And can possibly expand even further…..

      • Offset accounts pay no interest.

        There is no capital growth with your offset account. I’m not sure if that’s in the best interests of a tax advantaged trust with a preservation status…..

        Nor would the lender have recourse to the super balance.

        • Frank DrebinMEMBER

          I don’t think logic or long-term thinking come into it when talking about Australian housing and the lengths pollies will go to protect it

  7. OnsmokoMEMBER

    Why doesn’t the government just do us all a favour and provide 100% finance to all FHBs fixed for 50 years? 😁

    • Jumping jack flash

      Soon.

      It’ll be called a UBI. And it’ll happily buy an entire house, just very, very, slowly.

      After the banks have their fun pretending that they are responsible economic overlords and certainly not terraforming the global economy to enslave the entire world with their debt, they’ll come to their senses when they’re not making enough money, or worse, crashing all over the place, and bestow everyone with the next best alternative to interest rate cuts, a UBI.

  8. Jumping jack flash

    2 trillion outstanding debt dollars. 2 trillion super dollars.

    The problem kind of solves itself, like all good solutions.

    • Yeah bit that annoying fly in the ointment called inflation. Will that subside when you unleash another 2 trillion?