The Australian property market has experienced a ‘boom’ in confidence in October, according to Westpac bank.
A consumer survey conducted by Westpac has recorded an “extraordinary” surge in increased confidence, off the back of the federal budget.
Despite the pandemic-induced recession, the survey – which analyses consumer sentiment in Australia, saw house prices expectations and the “time to buy a dwelling” index bounce back in the past month.
Home buying confidence at its highest in more than 12 months as would-be purchasers accelerate out of the pandemic lockdown, bolstered by improved lending conditions and a hopeful outlook for 2021.
Confidence in the Australian property market was the lowest it has been in 47 years earlier in 2020, making this incredible recovery in buyer sentiment even more remarkable.
House price expectations have risen strongly, even in Victoria, where despite some easing of restrictions, strict lockdown measures are still in place,
"The apparent resilience of the Victorian market is impressive," said Westpac.
Westpac’s chief economist Bill Evans explains, “such a development must be attributable to the response to the October federal budget; ongoing success across the nation in containing the COVID-19 outbreak; and the expectation that the Reserve Bank board is likely to further cut interest rates at its next meeting on November 3.”
The results of the survey indicate that buyers have disregarded the warnings from the Reserve Bank of Australia and others, who have said that house prices could fall further next year as unemployment potentially rises, migration is drastically reduced, and government stimulus payments end.
"While housing prices have declined only modestly to date, they could fall further given weak population growth and the potential that some mortgage holders in financial difficulties sell their properties," the Reserve Bank said in its Financial Stability Review this month.
"Price falls would erode homeowners’ equity and increase losses to banks in some cases, though the vast majority of loans are very well collateralised."
Some of Australia’s largest lenders, including Commonwealth Bank and Westpac, are predicting that housing prices may not experience as large of a drop as initially predicted – with Westpac going as far as predicting that prices will increase substantially over the next 3 years.
Westpac has updated their home-price targets, estimating that prices will surge by 5 percent by the end of 2021, and an additional 15 percent over the next 2 years into 2023.
Gareth Aird, the Commonwealth Bank’s head of Australian economics explains, “Parking the Melbourne issues to one side, what has genuinely surprised us is the resilience of house prices in some of the other capital cities considering the negative shock to labour markets around the country.”
CBA are forecasting a sharp turnaround of property prices – which have been dropping amidst the COVID-19 crisis – by December next year, with prices in Sydney to rise by 2.9 percent. Peter King, Westpac CEO, says that improved housing affordability and sustained fiscal support has helped the bank amend its previous outlook for Australian property prices.
Not all banks are in agreement with these forecasts, with the ANZ last month stating that they stand by their prediction that prices will fall by 10 percent from the peak, before bottoming out in the second half of 2021.
NAB’s outlook for property prices falling over the next 18 months also remains steady – with the bank predicting that there will be a drop of between 10 to 15 percent.
Auction clearance rates are beginning to steadily improve, and the re-commencement of auctions under the revised COVID-19 lockdowns in metro Melbourne will also have an impact on the sector.