PHOTO: Australia’s property prices are expected to rise again mid-next year. (Photo by David Gray/Getty Images)
Economists from the Commonwealth Bank of Australia are feeling more positive about Australia’s property market and are now predicting a “solid recovery” in the second half of 2021.
Former CBA forecasts from April predicted house prices would fall 10 per cent.
But this figure has been revised upwards in light of the modest fall in home values so far despite the “extraordinary negative economic shock”.
According to CBA head of Australian economics Gareth Aird, two key themes stand out: the fall in house prices has been much smaller than expected, while the variation between the capital cities has been greater than expected.
“Parking the Melbourne issues to one side, what has genuinely surprised us is the resilience of house prices in some of the other capital cities considering the negative shock to labour markets around the country,” Aird said in a research note.
While house prices are expected to continue to soften, the CBA economists now expect a peak-to-trough fall of 6 per cent rather than 10 per cent.
And this trough is now expected to hit the first quarter of 2021, rather than the end of 2020 as previously anticipated. House prices will plateau between March and June of 2021, and then begin rising from July.
“Our forecast is for solid price growth in the second half of 2021 as the economic recovery gains traction and incredibly low interest rates once again become the dominant influence on dwelling prices.
“We expect a much larger disparity between outcomes by capital city than initially forecast,” Aird added.
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