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Too hot to handle: Bank tips 17 per cent rise in house prices this year

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ANZ has tipped house prices will jump by 17 per cent across the capital cities, almost double the bank’s previous forecast of 9 per cent, but warned the market was likely to overheat and force regulators to step in to curb lending.

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A report from the bank’s senior economist Felicity Emmett and Adelaide Timbrell said Brisbane house prices were likely to jump by 16 per cent, slightly less than the national average, and well behind Perth and Sydney where rises were tipped to be 19 per cent and Hobart 18 per cent.

The increases were likely to “lock some aspiring homeowners out of the market”, the report states.

The bank’s forecast was on the back of a 76 per cent jump in housing finance since May and auction clearance rates running at close to 80 per cent.

The report said the capital cities were now outperforming the strong growth previously seen in the regions with a 2 per cent national increase in February alone.

“Daily house price data suggest the gains in March will be even stronger,” ANZ said.

“Prices are now above levels seen in February 2020 in all capital cities bar Melbourne where prices were down 1.5 per cent.

“Owner-occupiers are driving the market with new housing loans up 80 per cent since the low in May. Investor activity is also growing strong (up 62 per cent since May).

“By June we expect prices to be rising at a more moderate pace given the end of government programs like JobKeeper and HomeBuilder and a lift in fixed mortgage rates.

“By year-end though, we expect regulators will step in with macroprudential controls to address the overheating market, with the exact measures likely to be dependent on how the market develops in the next six months or so.”

The economists warned that first-home-owners in 2021 were taking on almost-peak levels of debt with the average now $429,950, only about $1000 below the actual peak in 2019.

The bank said housing preferences had changed since the pandemic forced cities into lockdowns. It said builders were reporting a preference for home offices, additional living spaces and a stronger preference for suburban living.

Finding a tradesman may become increasingly difficult with a forecast for housing construction to grow over the year.

 

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