Australian house price inflation to skyrocket next year: Reuters poll Reuters

Author: Vivek Mishra

BENGALURU (Reuters) – Australia’s house price inflation rate will lose height next year and in 2023, but prices are still expected to rise in one of the world’s hottest real estate markets, a Reuters poll found.

In response to the economic slowdown caused by the pandemic, the Reserve Bank of Australia cut interest rates to a record low and flooded the financial system with cash – a powerful incentive for a housing market in which prices have almost doubled since the global financial crisis. 2007-09.

This property boom has come as a surprise to existing homeowners, but for many it has become an inaccessible home, widening the divide between those with high housing assets and those struggling to collect a deposit to enter the property ladder.

“The Australian housing market is on the verge of a huge boom driven by low mortgage rates. The huge rise in prices is not over yet, with house prices rising sharply in most capitals,” said Gareth Aird, head. Australian economy in the CBA.

Next year, average growth in house prices is expected to slow to 6.0% after rising by about 18.0% this year, according to a survey by 11 real estate analysts Reuters from 18 to 24 November. These estimates largely did not change according to the August survey.

But this rate of value in house prices was expected to slow dramatically in 2023 and 2024 to 2.0%, roughly inflationary in basic consumer prices.

Four analysts predicted that house prices will fall sharply in 2023, from -2.5% to -10.0%.

“We expect an orderly correction in house prices in 2023, around 10%. The extent to which prices are lower will largely depend on the speed and magnitude with which the RBA raises the box rate,” added Cird’s Aird.

Asked what would have the biggest impact on house prices next year, nine analysts in the property market said higher interest rates or a tighter monetary policy. The remaining three mentioned supply constraints, lower immigration, and macroeconomic policy.

Eight analysts who answered a follow-up question on how many basis points of the interest rate hike would significantly slow down housing market activity gave an average forecast of 100, with forecasts ranging from 25-400 basis points.

“If the RBA were to raise rates by almost 200bp as financial markets predicted until recently, the burden of managing household debt would be at an all-time high and housing would become the least affordable since the global financial crisis,” said Marcel Thieliant, an economist. Capital Economics.

“This would slow the recovery in consumption and could be a huge headwind for the housing market.”

The RBA’s cash rate will not rise from a record 0.10% until 2023, according to a recent Reuters survey, according to economists https://www.reuters.com/article/australia-economy-rates-idUSL4N2RN1DH.

But availability is a growing problem for the majority of first-time home buyers, as prices have risen much more than they can afford. Six of the nine analysts who answered a question about the bargain over the next 2-3 years said it would get worse. The other three said it would improve.

“Reductions in affordability are dire, new listings have risen sharply, and tightening of macro-prudence and higher mortgage rates will limit lending next year,” said Adelaide Timbrell, senior economist at ANZ.

“And while returning to immigration in 2022 will be an advantage, those negatives may offset more than that positive.”