The latest forecasts from Westpac and ANZ show that the worst may be over for the housing market and that prices are set to stabilize or even rise in some areas.
As recently reported by the AFR, Westpac forecast the housing correction is largely over, and the impact of several factors – migration influx, increased cost of new builds, and tight supply – has already flowed through to price increases in Sydney and stabilisation across the combined capital cities. Furthermore, the Westpac Melbourne Institute Consumer House Price Expectations Index is now 43 per cent above its November low and marginally above the long-run average reads.
In another AFR article, ANZ has also revised its earlier forecast of a housing correction, as new listings remain 20 per cent below the five-year average, and total listings are at their lowest since 2010. This is despite higher interest rates, as a tight rental market pushes some people from that market into the homebuyer market, combined with record rates of immigration.
So, what does this mean for you? Here are the key takeaways from the latest housing market forecasts.
Westpac has revised its earlier forecast of a 16 per cent peak-to-trough price fall to just 10 per cent.
The bank says the housing correction is largely over, citing factors such as migration influx, increased cost of new builds, and tight supply.
ANZ is also revising its earlier forecast, with Sydney prices set to rise 2 per cent this year and Perth to lift by 1 per cent.
New listings are 20 per cent below the five-year average, and total listings are at their lowest since 2010.
Tight rental markets are pushing some people into the homebuyer market, combined with record rates of immigration.
While the market remains on edge near-term as interest rates remain high, it’s unlikely that there will be another major slide this year.
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Why the housing market is stabilizing
As we mentioned earlier, several factors have contributed to the stabilisation of the housing market. According to Westpac, these factors include:
Migration influx: There has been an influx of migrants in recent years, which has helped to boost demand for housing.
Increased cost of new builds: The cost of building new homes has increased significantly in recent years, making it more expensive for developers to build new homes. This has led to a decrease in new construction, exacerbating the shortage of available housing.
Tight supply: There is currently a shortage of housing in many areas, which is driving up prices.
ANZ has also noted the impact of the tight rental market on the housing market, as many people are choosing to buy homes rather than compete for scarce rental properties.
Where are prices set to rise?
While the housing market is stabilising across the board, some areas are set to see price rises this year.
According to ANZ, Sydney house prices are set to rise by 2 per cent, and Perth is expected to lift by 1 per cent. Westpac has also noted that Sydney has already seen a 2.9 per cent increase in prices since bottoming out on February 7.
While the “mini-rally” in prices may still be fragile, the momentum shift from negative to stable is still important as it plays into expectations.
What could derail the market?
While the latest forecasts are generally positive, there are still some risks to the housing market. ANZ notes that the housing market remains on edge near-term as interest rates remain high.
Westpac warns that a May rate hike could “check” the market’s current stability, and the bank also notes that a significant increase in new construction could lead to oversupply and price drops in the future.
Another risk to the market is the possibility of a global economic downturn, which could impact Australia’s economy and housing market. Additionally, any changes to migration policy could also impact demand for housing and prices.
What does this mean for buyers and sellers?
For buyers, the stabilisation of the housing market may mean that prices have reached their lowest point and could start to rise in the future. However, it’s important to note that prices may not rise uniformly across all areas, and some areas may still see price drops.
For sellers, the stabilisation of the market could mean that it’s a good time to sell, especially in areas where prices are expected to rise. However, sellers should still be realistic about their price expectations and may need to be flexible in negotiations.
Overall, while the housing market is showing signs of stabilisation and even some growth in certain areas, it’s important to remain cautious and keep an eye on potential risks that could impact the market in the future.
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