House prices are set to bottom out by June after a 2.3 per cent fall before bouncing 15 per cent, according to Westpac’s economics team, who believe low mortgage rates and a less severe recession than feared will stabilise the market before a solid recovery.
After previously expecting a 10 per cent slump in national prices between April this year and June 2021, chief economist Bill Evans yesterday lowered the expected fall to 5 per cent as several capital cities proved more resilient, particularly Perth and Adelaide but also the biggest market of Sydney, where prices are likely to only adjust 5 per cent, half the amount previously forecast.
“This recovery will be supported by sustained low rates, which are likely to be even lower than current levels; ongoing support from regulators; substantially improved affordability; sustained fiscal support from both federal and state governments; and a strengthening economic recovery (particularly once a vaccine becomes available, which we expect in 2021),” Mr Evans said.
The forecast change comes amid improving optimism among economists about the housing market following better than expected performance and data, housing finance approvals last week jumping by a far stronger than expected 8.9 per cent in July.
Mr Evans said he had been surprised at the strength of the recovery in new lending, and the 15 per cent price rise call may also prove too cautious.