Australian Property Market Set for Quicker Recovery Despite Challenges.

Despite initial fears of a housing price plunge in Australia, the property market is predicted to recover more quickly than expected, thanks to a combination of factors that have taken economists by surprise. ANZ Bank and Westpac have both revised their outlooks, with Westpac chief economist Bill Evans now expecting house prices to remain flat this year and potentially increase in 2024, in contrast to previous predictions of significant declines in Sydney, Melbourne, and Brisbane.

ANZ senior economists Felicity Emmett and Adelaide Timbrell attribute the more optimistic outlook to a tight supply of new listings and increased demand due to the return of migrants. Emmett said, “Low levels of supply and stronger than expected demand look to have trumped the impact of higher mortgage rates over recent months”. The tight rental market and record rates of immigration are also contributing factors.

However, the rising cost of debt, supply chain issues, and construction cost increases have sparked concerns across the investment industry. James Wright, in his article “Why property price falls are just the tip of the iceberg,” highlights the impact of these factors on the construction sector and the potential implications for property prices.

Despite these challenges, ANZ now predicts a 2% increase in Sydney house prices and a 1% increase in Perth this year, while Westpac anticipates a 5% increase in Australian house prices in 2024. On the other hand, ANZ expects declines in Brisbane, Adelaide, Hobart, Darwin, and Canberra, with Adelaide predicted to drop by 1% in 2024.

Nevertheless, the property market’s recovery is expected to be slow and modest, according to Emmett. She noted, “The shallower than previously expected decline in housing prices suggests to us that any recovery will be slow and modest”. The property market’s future will ultimately depend on the ability of buyers and sellers to navigate the challenges posed by rising costs, constrained supply, and market fluctuations.

References:

Sharples, Sarah. “ANZ predicts property market to bounce back quicker than expected.” https://www.news.com.au/finance/real-estate/buying/anz-predicts-property-market-to-bounce-back-quicker-than-expected/news-story/14a86badc827b2a6dbac020641be5864 ↩

Wright, James. “Why property price falls are just the tip of the iceberg.” https://www.afr.com/wealth/personal-finance/why-property-price-falls-are-just-the-tip-of-the-iceberg-20230420-p5d1y6