The housing market will avoid a major crash and will hit a plateau this year, according to a projection by ANZ economists.
ANZ predicts that housing prices will rise by 8% this year before falling by 6% in 2023. ANZ Economists Felicity Emmett and Adelaide Timbrell are predicting interest rate hikes, but say that other forces will also be in play as the COVID-19 pandemic eases, according to a media report.
“While we expect the cash rate to rise sharply from September this year to 3% by end-2023, cashed-up households, very low unemployment and a lift in immigration will all support the housing market through this period,” Emmett and Timbrell wrote.
They said this support would limit the downturn in home prices. However, prices are still expected to drop as rates rise. The huge gains in house prices seen in 2021 won’t be repeated in 2022, the economists said.
“Higher mortgage rates, alongside macroprudential tightening, rising new listings and constrained affordability will see house price inflation moderate this year,” they said.
Emmett and Timbrell said that the return of immigration and low unemployment will support housing, but that eventually higher rates would push prices downward – albeit not sharply. They predicted that average capital city prices would rise in a more pronounced way – by about 8% this year, and fall more sharply, by about 6%, in 2023, The Australian reported.
“After a peak-to-trough rise in house prices of over 30% since late-2020, a decline of 6% is quite modest, and is unlikely to feed through to sharply lower residential construction or weigh heavily on consumer spending, given very high savings rates and increased buffers,” Emmett and Timbrell wrote.
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