Auction clearance rates are usually a leading indicator of house prices, yet there still appears to be plenty of demand from buyers. That is being driven by record-low variable mortgage interest rates and fear of missing out by wannabe owner-occupiers.
However, property prices in our two largest cities could soon be hit by affordability constraints. Though that is already occurring among first-home buyers who, while still active, are not coming into the market in the same numbers as at the start of the year, the higher prices do not appear to be constraining upgraders.
Shane Oliver, chief economist at AMP Capital, believes property prices nationally may rise another 5 per cent in the remainder of the year, taking the gain over the full year to about 20 per cent, with a further rise of 5 per cent in 2022. However, he says the recent lockdowns have increased uncertainty over what property prices may do.
Meanwhile, ANZ economists are forecasting national property prices to rise by more than 20 per cent in 2021, regardless of the latest round of lockdowns. They have pencilled-in a rise in Sydney prices of 23 per cent during this calendar year and 20 per cent for Melbourne.
ANZ senior economist Felicity Emmett says the lockdowns are unlikely to derail the housing market’s overall strength.
Even in Melbourne, where the clearance rate had been hit the hardest, prices are still holding up well, she says.
ANZ expects house prices across the capital cities to rise by 7 per cent next year and a further 3 per cent in 2023.
Westpac analysts are forecasting dwelling values to rise by 5 per cent next year, followed by a drop of 5 per cent in 2023.