SYDNEY, Australia – The big four banks of Australia have forecasted a rebound on property price beginning next year.
During the pandemic, the big four have already forecasted a significant drop in the country’s house prices. However, in recent statistics, the property price fall appeared to be at least half of the forecasted decrease. This number leads the prominent banks to be hopeful on property price rebounds to be possible quicker than they expected.
Originally, Westpac had an anticipated property price fall of at least 10 per cent by June of next year. This calculation is in consideration of all the repercussions brought by the COVID-19 pandemic. These contributing factors include the drastic economic recession, job cuts, closed industries, and many others. With the total number of price decreases this year only falling at half of the projected number, Westpac is now positive that only half of their previously projected fall will hit the country by next year.
The bank’s economists are now seeing a much quicker return to growth in the property market. Their latest forecast revealed that the country’s property price is set to have an appreciation of at least 15 per cent in the next two years, ending with a strong property industry default.
The latest projections provide a more forgiving number for the property price fall of big cities such as Sydney with only five per cent drop and Brisbane at two per cent. Property prices rise in Adelaide is now at a projected two per cent, while Perth prices stay as-is. However, Melbourne will still hold its projected 12 per cent fall.
This number might also result from recent data that the COVID-19 pandemic has pushed city dwellers to flee the cities and opt for regional residentials instead. Major CBD markets are now reporting double-digits of rental vacancies in their areas. Sydney CBD’s rental vacancy rates are now at 12.9 per cent, while Melbourne CBD is 10 per cent. This rise in these cities’ rental vacancy rates comes after the fall in regional areas’ rates, recording an all-time-low of rental vacancy rates.
However, economists are nonetheless hopeful that by April to June next year, capital cities will come out stronger with a lesser property price drop of only five per cent.
Westpac’s forecast also came after the Australian Bureau of Statistics (ABS) released the data of the typical home shed of about 12,500 dollars since this year’s first months. It anticipates a phase when many property sellers are expected to sell or let go of their properties because of repayment difficulties. Westpac’s revision on forecasts also followed Commonwealth Bank’s changed forecasts to a six per cent fall.
Westpac’s senior economists mentioned a four-phase plan for default property prices to bounce back to at least 15 per cent. The first phase was a drop in property prices. According to data, this has been inevitable since the pandemic’s economic collapse peaked at around June.
The next phase involves a property price stabilization at around the end of this year to the first quarter of 2020. Economists are hopeful that there can be price rises in the coming months as the whole country is also already getting back on its feet. However, there is an exemption for Melbourne, which is still expected to maintain a relative property price drop. The city is anticipated to be at a quarter behind the rebound of its adjacent states.
The third phase of the recovery plan may be one of the most crucial as prices are projected to fall back again due to “urgent sales.” During the past months, banks have offered and approved new loans, home loan deferrals, and other COVID-19 relief packages to ease many Australians’ financial difficulties. In the past weeks, the big four banks have laid out responses that their companies enacted during the pandemic. These responses, joint forces with government efforts, gravely contributed to the citizens’ financial stability during the economic fallout.
The national government offered many schemes such as JobKeeper and the early release of many working Australians’ superannuation funds. These schemes released millions of amounts to provide COVID-19 support.
In the coming months, these COVID-19 relief packages are also about to cease. For example, at the pandemic’s peak, prominent banks offered home loan deferrals of up to six months. With the economy still being unstable at the end of the six months provided, banks offered further help, providing deferrals options to stretch as far as next year. The second batch of early superannuation releases has just been made, but with millions of Australians accessing the scheme, super funds for many are rapidly zeroing out.
With all of these measures and efforts ending by next year, another phase of “softening” in the market’s property price is also anticipated. Around March of 2021, there will be an estimated 60,000 “urgent sales” as a result of property owners’ repayment challenges. This number is about 15 per cent of the total number of properties and houses sold each year. Economists are wary that this number is enough to put a significant decrease in the house prices in the industry again.
However, at the presented recovery plan, the fourth phase is where prices are expected to rebound significantly. The factors that might influence the boost are substantial low-interest rates, especially for fixed rates, and a less harsh recession than projected.