Major banks expect Australia’s real estate boom to continue

Major Australian banks predict that the country’s real estate boom will continue with the support of a strong economic recovery and ultra-low interest rates. The acceleration of price increases after COVID-19 is driven primarily by homeowner buyers and reflects supply lagging behind changes in demand.

In a recent session with Canberra’s Housing Economics Commission, the CEOs of all four major banks all gave optimistic outlooks on rising home prices. Commonwealth Bank (CBA), Westpac Bank and National Bank of Australia (NAB) forecast an increase of at least 10% this year, and ANZ Bank forecasts annual growth of up to 17%.

CBA CEO Matt Comyn said banks have raised their 2021 home price forecast in response to the “acceleration” of price increases in February and March.

“We were thinking about 8%, but now we are thinking about 10%,” he told Liberal Party lawmaker Tim Wilson. April 15..

Westpac CEO Peter King is confident that the current momentum will continue for another 12 months, saying, “Because the market isn’t selling very well and inventory is very tight, bid well for your home. “

On April 16, ANZ CEO Shayne Elliott predicted last month that home prices could rise 17% this year, NAB’s Ross McEwan was similarly optimistic, and home price inflation was “10. It can exceed%. ” [this year], But I know the time. “

Updated forecasts are in the midst of many positive economic statistics in Australia, NAB’s business situation Record highs in March, bright Consumer trust And lower than expected March unemployment rate —It decreased from 5.8% to 5.6%. All of these increase and strengthen confidence in the real estate market.

Soaring prices are not an economic risk

Mr. Komin, who previously described the labor market recovery as “miracle,” said it was important not to worry about rising real estate prices, which is a positive sign and consistent with a strong economic recovery. Insisted.

“We are not overly interested in what we are currently seeing in the context of broader financial stability,” he said.

All bankers also said that, unlike the previous boom, current market activity is dominated by homeowners, mitigating potential risks to financial stability.

First homebuyers make up about 75% of both banks’ loan applications, according to CBA and ANZ data. At NAB, 16% of mortgages were directed to first-time homebuyers, with an average loan amount of $ 280,000.

In contrast, investment loan growth is much slower.

“Looking at high LVR, interest only, investor lending … these three are much lower and slightly higher than at last peak, but not so much in the last 6-12 months.” Said King of Westpac.

In addition, all CEOs say that customers pay off their loans faster, which reduces interest rates and therefore less risk.

According to NAB’s McEwan, many refinancing to low interest rates maintain their original repayment levels, with 70% of NAB’s customers paying back at least a month in advance.

Price is a function of supply and demand

The views of the big banks are also reflected in Rich Harvey, the founder of Propertybuyer, Sydney’s buyer advocacy agency.

Having experienced several market cycles during his 20-year career as a licensed real estate purchasing agent, he said soaring prices, especially those in the Sydney market, are a function of supply and demand.

“COVID-19 has accelerated demand for real estate and encouraged many to move forward with home purchase plans,” a former senior economist told The Epoch Times on April 16.

“Low interest rates are having an impact, but what has made people buy is government stimulus and household surplus savings.” In addition, strong economic recovery and lower-than-expected unemployment have also hit the real estate market. Helps build trust.

Most of Harvey’s clients are homeowners, and housing is becoming the preferred option.

“COVID-19 has changed people’s tastes in life,” he explained. “More and more people are buying for larger sizes and lifestyles, but inventory is tight.”

Harvey also observed a flood of monetized expatriates in the market to secure homes.

“Since the outbreak of COVID-19, 440,000 expatriates have returned and they are replacing foreign investors as enthusiastic and powerful buyers,” he said.

His team bought off-market real estate in the eastern suburbs of Sydney for $ 8.5 million for the families of expatriates who returned home.

Signs of mitigation of frenzy

Harvey believes that the current momentum will continue for some time, unless there is a significant catch-up in supply. “If you want to buy real estate, act now,” he said. “If you wait until the price goes down, you’ll miss it.”

However, some agents are feeling signs of slowing down.

Tom Panos, a Sydney-based auctioneer with 30 years of experience, said Sydney’s real estate market could be flat while still hot.

“The first sign is that more properties are being sold before the auction,” he told The Epoch Times. “In most cases, real estate is sold before the auction because of low interest rates, so it is sold before the auction.”

After witnessing FOMO (Fear of Missing Out) in person at auctions in the last few months, Panoz recently discovered a new feeling of fear of overpayment.

“Some buyers have found that they are simply fed up with crazy real estate prices and are moving from buying to just observing,” he said.

On the supply side, Panoz expects more to be listed on the market in the coming months as higher prices will allow vendors to take advantage of the high market.

“This basically means that the buyer has more choices, which will remove the pressure from the price,” he explained. “I don’t think prices will go down in the short term, but the madness will subside. This is good news for buyers,” he said.