Melbourne house prices are forecast to fall by 15 per cent, while Sydney prices could drop by 13 per cent from peak to trough before bottoming out in the second half of 2021, as the pandemic and related shutdowns weigh on confidence, ANZ says.
At a national level, the bank has maintained its forecast for prices to fall by 10 per cent from peak to trough. But it now tips smaller house price drops in Hobart, Brisbane, Adelaide, Perth and Canberra.
Hobart house prices are set to fall by 9 per cent, Hobart by 8 per cent, and Brisbane by 6 per cent.
ANZ said Canberra, Adelaide and Perth will outperform the bigger capitals with a smaller price drop expected at 2 per cent, 3 per cent and 4 per cent respectively.
In May, the bank predicted house prices in Sydney, Melbourne and Hobart to fall by 13 per cent over the same period. Brisbane and Darwin prices were expected to fall by 7 per cent, Adelaide by 6 per cent and Canberra by 5 per cent.
“The decline in house prices over the past three months has been slightly more modest than we expected,” the bank’s economists wrote.
“The government support payments to households, superannuation withdrawals and deferred mortgage repayments are all supporting the housing market.
“We anticipate prices will bottom out in the second half of 2021 as the labour market improves, but the recovery is likely to be relatively gradual given that we expect unemployment to stay above 8 per cent until end-2021.”
The bank said falling wage income, heightened uncertainty, and the drop in population growth due to the border closures will depress the market in the next year or so.
“The deterioration in household income will be the biggest driver of weakness, but elevated uncertainty, much lower population growth and weak investor appetite given the slump in the rental market will all weigh on house prices,” the report said.
“While the deferral of home loan repayments and the likely move to more medium-term forbearance measures have (and will) help to prevent forced sales, lower demand and higher uncertainty will drive prices lower in the next year or so.”
This story originally appeared in the Australian Financial Review. Read the original story here.
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