Melbourne house prices: ANZ reverses ‘pessimistic’ 2021 forecast
A big four bank has conceded its prediction just a few months ago of a 15 per cent hit to Melbourne house prices was “too pessimistic”, now tipping a turnaround to a positive 2021 instead.
A major bank has dramatically reversed its “pessimistic” forecast for Melbourne home prices.
In August, ANZ expected prices to suffer a 15 per cent peak-to-trough decline that stretched into 2021, as Victoria’s capital endured its crippling second wave of COVID-19.
Its latest report confirmed Melbourne had experienced a 4.9 per cent price drop in the six months to October — but it also predicted a “sharp turnaround” into a 7.8 per cent rise next year.
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ANZ also tipped a strong 2021 for the other Australian capitals, naming Perth as the likely strongest performer with expected 12 per cent gains, followed by Brisbane (9.5 per cent) and Hobart (9.4 per cent).
Sydney was expected to hover around the national average of an 8.8 per cent rise, with Melbourne to “lag a little”, given its extended pandemic pain under stage four restrictions that essentially halted property market activity in August and September.
The report by ANZ economists Felicity Emmett and Adelaide Timbrell noted the bank’s previous forecast had been “too pessimistic”, and attributed the nation’s housing market revival to record-low interest rates and “substantial” government stimulus like JobKeeper.
“Since our last forecast, fixed rates have moved down substantially — the amount of interest people are paying on fixed-rate mortgages has approximately halved over the past year and a half,” Ms Timbrell said.
Melbourne’s “quicker-than-expected” suppression of its second wave also had a major impact, she added.
“These factors seem to be offsetting weak fundamentals of high unemployment, very low population growth and a fractured rental market,” the pair said.
“An early vaccine rollout and the resulting lift to sentiment could drive larger price gains than we currently anticipate (in 2021).
“That said, we think regulators would be quick to step in with macro prudential measures if the market looked be overheating.”
Another property research firm, CoreLogic, recently tipped Melbourne home values to begin rising before 2020 was done, following seven straight months of falls.
Head of research Tim Lawless said the rate of decline had steadily improved, from 1.2 per cent in July to just 0.2 per cent in October, after the lifting of a ban on physical home inspections from September 28.
“It looks like buyers, as well as sellers, are back in the marketplace,” he said.
Ms Emmett and Ms Timbrell noted owner-occupiers — particularly first-home buyers and upgraders who had retained stable employment — were driving the market recovery, bolstered by government support and a desire to “take advantage of historically low interest rates”.
Investor activity had increased, but remained well below peak levels from 2015.
The report also reflected continued COVID-driven pain in the Melbourne rental market, with asking rents in apartment-dominated suburbs like the CBD (-22.6 per cent), Carlton (-20.8 per cent) and Docklands (-19.6 per cent) plunging between March and September.
Rental listings simultaneously skyrocketed in these postcodes, by 104.3 per cent, 98.8 per cent and 135.6 per cent respectively.
Ms Timbrell said a rapid return of rental demand was unlikely, given it had been stifled by “a disproportionate loss of income” in tenant-dominated industries and the shutting out of international students and migrants by border closures.
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Originally published as Melbourne house prices: ANZ reverses ‘pessimistic’ 2021 forecast