The housing market is “on the verge of a boom,” according to CBA.

According to the Commonwealth Bank, Australia's housing market is on the verge of a boom, with house prices expected to rise 16 percent in the next two years (CBA).

Gareth Aird, the head of economics of Australia’s largest bank, anticipates that national house prices will rise by 9% in 2021 and another 7% in 2022.

In the meanwhile, apartment prices are expected to grow 5% in 2021 and 4% in 2022.

In a message to clients, Mr. Aird said, “The negative impact of COVID-19 on Australian property prices turned out to be substantially more modest than nearly every forecaster projected.”

The CBA’s forecast is similar to one included in an internal RBA FOI document, which predicts that house prices might climb by up to 30% over the next three years if interest rates continue low (which the RBA has indicated will happen).

So, what can we expect in different parts of the country?

According to Mr. Aird, dwelling (house and apartment) prices in Sydney and Melbourne are expected to rise by at least 12% in the next two years.

The median house price in Sydney would rise by $160,000 to $1.2 million, while the median house price in Melbourne would rise by $110,000 to $920,000.

Meanwhile, prices are expected to grow 17.7% ($99,000), 16.6% ($102,000), and 15.5 percent ($132,000) in Perth, Brisbane, and Canberra, respectively.

Adelaide is expected to rise 14.5 percent ($86,000), Hobart 15 percent ($87,000), and Darwin 18 percent ($99,000), rounding out the capital cities.

So, when and why are housing prices expected to rise?

Mr. Aird says in a CBA podcast that the “boom” may have already begun.

“National prices are up 0.8 percent in the first two weeks of February, so we’re looking at over 1.5 percent in February alone,” Mr. Aird adds.

“Prices are now rising across the board in all major cities. And they’re increasing at a rapid pace.”

Mr. Aird believes that lending figures are a good indication of property prices and that lending has increased dramatically in the previous four to five months.

“When you think about it, the money that individuals borrow ends up flowing into the housing market, which then pushes up housing prices,” he continues. “There’s normally about a six-month lead time.”

“At first, that (lending) was limited to owner-occupiers, but it has lately expanded to include investors, which is now seeping into housing prices.”

Mr. Aird adds that auction clearing rates are another key indicator.

“At the moment, they’re extremely firm.” “We’re seeing it in the 80s (percent) nationally,” he adds, “which has historically been associated with double-digit dwelling price rise.”

According to Mr. Aird, the RBA’s announcement that the record-low official cash rate will not be raised until 2024, as well as a solid labor market recovery, are significant momentum boosters.

“The Reserve Bank’s unambiguous public guidance that rates would remain very, very low for several years has given borrowers a great deal of confidence to go out and take on debt,” he adds.

“All of the inputs into our model scream that house price increases might be quicker than they’ve ever been, and our model goes back ten years.”

Look into your choices.

Get in touch with us immediately if you’re one of the many potential homebuyers who are optimistic about the housing market right now and want to learn more about your financing choices.

We’d be delighted to assist you in determining if you can afford that property, you’ve had your eye on before the next housing bubble bursts.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au


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