Another senior economist has changed their view on the housing market.
One by one they are upgrading their property forecasts and agreeing that our housing market won't crash like they had previously forecast.
Recently ANZ's economists amended their more pessimistic outlook and now expect capital city housing prices to end this year unchanged before a modest rise in 2024.
ANZ's economists expect capital city housing prices to end this year unchanged before a modest rise in 2024.
Felicity Emmett, Senior Economist for ANZ said:
"After just a 9% decline in capital city housing prices over the past year, the recent upturn has surprised us.
We previously thought the sharp rise in interest rates (delivered and forecasted) would continue to weigh on housing prices through most of 2023, with prices declining 10% through the year.
We now think most of the weakness is behind us."
Low levels of supply and stronger-than-expected demand look to have trumped the impact of higher mortgage rates over recent months.
New listings are 20% below the five-year average.
Total listings are at their lowest since 2010.
This comes at a time when immigration is surging after the lull through 2020-21 when international borders were closed.
Even before the rush of new arrivals, the pandemic had already driven housing demand sharply higher with the average number of people per household falling to a record low.
Adelaide Timbrell, another Senior Economist at ANZ said that Auction clearance rates reflect this tightness in the market.
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She commented further:
"Over recent months they’ve lifted to the mid-60s – a rate consistent with annual housing price gains in the order of 10%.
As well, the RBA cash rate hikes have not fully flowed through into mortgage rates.
Intense competition amongst the banks has meant that average mortgage rates on new loans have risen nearly 50bp less than the cash rate."
"The RBA’s decision to pause the rate hike cycle in April is likely to have encouraged some optimism.
The latest Melbourne Institute Consumer Confidence survey showed a strong lift in house price expectations."
"We did expect that strong household income growth and large savings buffers would provide a cushion for the fall in house prices.
It’s possible that these are providing more support than we originally anticipated.
Indeed, the early recovery in housing prices suggests that the household sector remains resilient despite headwinds from high inflation and rising interest rates."
Finally, Timbrell said:
"The shallower than previously expected decline in housing prices, suggests to us that any recovery will be slow and modest.
We now expect that prices will rise just 2% in 2023, down from our previous estimate of 4%."