Property price forecasts for the rest of the year

There is a clear relationship — a causation not a correlation — between the annual change in housing finance (when brought forward by six months) and the annual movement in house prices.

These two charts help explain the short-term future direction of Australian house prices.

Chart 1 suggests that house prices are likely to surge over the next six months.

In May — via chart 2 — I suggested that if the past relationship between housing finance and house prices plays out over the next six months, then it is possible that Australian house prices could rise by 14% for the 2021 financial year and the annual increase could be as high as 25% for the year ending September 2021.

Chart 2 below shows that the annual house price for fiscal 2021 came in at 18.8% (so higher than the forecast 14%) and the annual growth rate for the year ending September is still holding at around 25%, whilst the yearly growth rate for calendar 2021 looks like it could come at around 38%.

Yes, 38%!Despite the rolling lockdowns and talk of a double dip recession, the housing market appears to be gaining heat, not cooling.

And as I stated last May too, without much wage growth and persistent local unemployment (and especially underemployment) one wonders how long this can last.

Also, one must ponder when APRA and the RBA will step up to the plate and slow this down.

To reiterate that won’t happen this side of a federal election.

Yet a lot has happened in the last three months and given recent events, the federal poll looks like it will be now held at the latest possible date — late May 2022 — rather than in 2020.

So, the good times — housing market price-wise — look set to continue for a while longer.

These two tables help outline the short-term future direction of Australia detached house prices, by capital city.

Table 1 shows – and assuming the historical relationship between housing finance and detached house prices hold – that the median detached house price across Australia could be in excess of $1million by end of 2021.

Table 2 outlines that over the past six months, detached house prices rose by 12% across Australia – and again if the past link between the growth in housing finance and house prices continues – then Australian detached house could rise by $210,000 or as much as 23% between the 30th June and 31st December this year.

House sales are rising whilst stock listed for sale is declining, adding another string to the housing market bow. Lockdowns are giving people time to investigate buying, whilst keeping supply tight. Loose credit and record low interest rates are adding fuel to the fire.

from Property UpdateProperty Update https://propertyupdate.com.au/price-forecast-part-1/