ANZ bank has forecast that the Sydney and Melbourne house prices will be growing at more than 12 per cent per annum by the middle of next year.
ANZ Economists believe that house prices in aggregate are now picking up solidly.
The say that interest rate cuts, easing of finance regulations and taxation certainty have combined to create an ideal environment for a solid rebound and will super-charge the Sydney and Melbourne property markets to a point they will effectively wipe out the price falls recorded between 2017 and early this year.
ANZ believes that by the end of this year, Sydney and Melbourne prices will be up by a further 3 per cent.
By the middle of next year, these markets could be growing at an annual rate of 12 per cent and 13 per cent respectively.
ANZ senior economist Felicity Emmett said the property markets of the two cities were re-bounding much quicker than expected.
“Auction clearance rates bottomed out in December and have been rising since. But the improvement became much more marked from May onwards,” she said.
“The change in sentiment was driven by the combination of lower rates, easier access to credit, and increased certainty around housing taxation. Together, these factors have helped to shift sentiment from one of pervasive negativity to broad optimism.”
Strong auction clearance rates
With auction clearance rates remaining high, increased prices are likely to follow as has happened in the past…
Lower interest rates are fuelling our markets
The Reserve Bank has cut interest rates 3 times now and since then, dwelling values as measured by CoreLogic have increased strongly in Sydney and Melbourne.
The following chart from ANZ shows how interest rate cuts (the little red squares) historically lead to rising property prices, and the same is happening this time around.
The lift in prices, however, will come at a longer term cost with household debt levels likely to increase while affordability will fall.
“As prices recover, we expect affordability, particularly in Sydney and Melbourne, to decline,” Ms Emmett said.
The recovery in house prices has been particularly marked in Sydney and Melbourne, where the property slump was felt the most.
And, as always, the markets are fragmented across different price brackets
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