ANZ predicts property market to bounce back quicker than expected

The most aggressive round of interest rate hikes in decades in Australia and a rental crisis are creating a surprise outcome in the property market.

Despite fears that house prices would plunge in Australia, unexpected factors have taken one major bank’s economists by “surprise” with predictions the property market is destined for a quicker recovery.

The low number of new homes for sales, a surge in migration and a rental crisis have all combined to offer some protection on house prices despite a record breaking round of 10 consecutive interest rate rises.

ANZ is the latest bank to paint a rosier picture for house prices after Westpac made a sharp reversal on its previous predictions, which had included Sydney house prices plummeting by 8 per cent, Melbourne experiencing falls of 10 per cent and Brisbane suffering a 6 per cent decline.

Westpac chief economist Bill Evans said while house prices are expected to remain flat this year, he believes they could jump higher in 2024.

House prices are expected to recover quicker than expected. Picture: NCA Newswire/Gaye Gerard

Now ANZ senior economists Felicity Emmett and Adelaide Timbrell have also backed price rises starting much earlier, despite the most aggressive series of rate rises in decades, due to the tight supply of new listings and increased demand from the return of migrants.

“After just a 9 per cent decline in capital city housing prices over the past year, the recent upturn has come as a surprise to us,” Ms Emmett said.

“Low levels of supply and stronger than expected demand look to have trumped the impact of higher mortgage rates over recent months.

“New listings are 20 per cent below the five-year average and total listings are at their lowest since 2010, so people are just not putting their homes up for sale.

“At the same time, we have an incredibly tight rental market that’s probably pushing some people from that market into the homebuyer market. We also have record rates of immigration which all combined to more than offset those higher interest rates.”

ANZ senior economist Felicity Emmett. Picture: Supplied

ANZ previously predicted that house prices would slump by 11 per cent this year across the nation.

Now the big bank is predicting Sydney house prices to rise 2 per cent this year and Perth to lift by 1 per cent.

However, Melbourne is expected to end the year flat, while house price falls are expected to hit Brisbane by 2 per cent, Adelaide by 6 per cent, Hobart by 8 per cent, Darwin by 4 per cent and Canberra by 5 per cent.

Yet, ANZ has forecast house price rises in 2024 in Sydney, Melbourne, Canberra and Hobart with a gain of 2 per cent, while other capital cities are expected to do even better with an increase in Brisbane by 5 per cent, Perth by 4 per cent and Darwin by 3 per cent.

ANZ Research has adjusted its house price predictions after low supply and high demand affected the market. Picture: Twitter/ANZ Research

Across Australia, house prices are set to increase by 3 per cent in 2024, but Adelaide is expected to drop by 1 per cent.

‘The shallower than previously expected decline in housing prices suggests to us that any recovery will be slow and modest,” Ms Emmett said.

Intense competition for customers has also seen banks’ average mortgage rates on new loans 0.5 per cent less than the rises pushed through by the RBA, while the pause on hiking in April had also given the market a boost.

“We did expect that strong household income growth and large savings buffers would provide a cushion for the fall in house prices,” the economists added.

Westpac has gone even bigger – predicting house prices to lift 5 per cent in 2024 across Australia – a jump from previous forecasts of 2 per cent.

HSBC has also changed its forecast from a fall of 6-8 per cent for the Australian housing market in 2023, to a drop of just 1-3 per cent.