Bank predicts u-turn with house prices climbing again next year
Westpac has called the end of the housing crash and said a sustained price gain would emerge in 2024 when interest rates were expected to fall.
It now takes a decade to save for a median priced home. Photo ABC
Instead of price declines averaging -7 per cent this year, the bank now expects the national market to remain flat after falls of about 10 per cent between April 2022 and January 2023.
In Brisbane, the bank has tipped a minor fall of -1 per cent this year with a 6 per cent gain next year, slightly better than the 5 per cent gain anticipated in Sydney and Melbourne.
If correct, the bank said the peak-to-trough decline nationally would be about 10 per cent, significantly better than the previous forecast of 16 per cent.
However, the market would remain on edge in the near term and inflation was the key to the outcome. It said the mini-rally that has occurred in recent months was fragile, but the momentum shift was important.
“Another major slide seems unlikely although gains will be hard to sustain given interest rates and wide economic headwinds.
“Prices nationally held flat in February, posted a 0.8 per cent gain in March and are tracking a similar gain for April based on daily figures for the month to date.
“While the details shows gains are still lopsided (centred on Sydney’s upper tier) and seasonal boosts are flattering the situation a little, all major capital city markets have now seen prices stabilise or post small rises over the last three months.”
The bank believes the market would increase by 5 per cent in 2024, up from the previous prediction of 2 per cent.
“The main risks continue to centre around inflation, particularly if disappointing progress on bringing inflation under control leads the Reserve Bank to resume hiking interest rates later this year, but also if ongoing high inflation constrains the bank from easing policy in 2024,” it said.
“Both developments would clearly undermine housing market improvements and could potentially lead to a reversal.”
The bank said the public was overly pessimistic about interest rates, but this should evaporate over time and confidence should rebuild.
Westpac said comfort with interest rates would lure back investors.
“Indeed, we may see a significant shift in investor attitudes in coming months.”
