CBA Tips 16pc House Price Growth
The CBA is forecasting a surge in house prices over the next two years of up to 16 per cent, while unit price-growth will be more muted at 9 per cent.
According to the CBA, lending rates have lifted sharply, signalling a housing market on the “cusp of a boom”.
“The increase in new lending is now feeding into higher prices for bricks and mortar,” CBA economist Gareth Aird said.
“The negative impact that Covid-19 had on Australian property prices turned out to be much more muted than almost any forecaster expected, us included.
“We were earlier than most, however, to recognise this and revised our call in September 2020 to look for a smaller peak-to-trough fall and a decent lift in prices over 2021.
“But even then, the rapid growth in new lending over the second half of 2020 was stronger than we anticipated.”
In its most recent economics issues report, released today, economists at the CBA reported the boom was off the back of record low interest rates and a v-shaped labour market recovery.
Aird said record low borrowing rates remained below rental yields across most markets and it meant property markets “would need to find equilibrium” in the form of dwelling price rises.
“A critical assumption underpinning our forecasts is the cash rate remaining at its record low of 0.1 per cent, which is in line with RBA forward guidance,” Aird said.
“We do, however, factor in a modest increase in fixed rate mortgages, which will rise if the RBA removes or raises its target yield on the three-year Australian Government bond, as we expect in the second half of 2021.”
The CBA is reporting positive momentum is building within the property market and “as the market firms, would-be buyers are more confident to purchase and this brings other buyers into the market”.
The news is less positive for unit-owners. CBA is forecasting a disparity in price growth between houses and apartments.
“We forecast national house prices to rise by 16 per cent over the next two years and unit prices to rise by 9 per cent,” Aird said.