Westpac forecast 18% dwelling price rise in 2021 and 5% next year
Westpac have revised upwards its outlook for Australian dwelling prices.
It had predicted, earlier this year, a 20% increase over 2021 and 2022.
But a stronger than expected surge over the first half of 2021 is now expected to see prices up 18% this year with a further 5% coming next year.
While the duo, Bill Evans, Westpac's chief economist and Matthew Hassan, its senior economist, see lockdowns as likely to cause some loss of momentum in the third quarter, particularly in the Sydney market, they see a swift rebound with price growth lifting again into year end.
Price growth is expected to slow to 5% in 2022 with most of the increase occurring in the first half.
Prices are then expected to decline 5% in 2023 as stretched affordability in most markets combines with the RBA’s first rate hike cycle since 2009.
"The upswing that emerged at the start of this year has continued to run ahead of expectations with markets carrying strong momentum into the second half," they noted.
Prices nationally rose 12.2% over the first six months, an extraordinary 25.6% pace in annualised terms.
The update noted deteriorating affordability is already weighing heavily on buyer sentiment with the ‘time to buy a dwelling’ index in the Westpac Melbourne Institute Consumer Sentiment Survey is down 25% from its peak last November.
"There are also tentative signs that finance to owner occupiers has peaked."
They see macro–prudential tightening as highly likely.
"The timing is expected to be delayed until around March–June 2022.
"Measures are expected to be successful and to weigh more heavily on markets where affordability is stretched.
"Price growth is expected to stall in Sydney and Melbourne through the second half of 2022 but maintain some positive momentum in most other markets where affordability is still attractive."
The combination of rising rates; stretched affordability; and macro–prudential policies is likely to see prices easing off their highs by an average of around 5% in 2023 with all markets expected to see modest declines, Westpac forecast.
