Home prices are set to rise in all Australian capital cities in 2021, economists predict, buoyed by low interest rates, an improving economy and government stimulus.
But they warn inner-city apartment prices in Melbourne and Sydney will continue to fall, due to a drop in immigration and international students and increasing numbers of city dwellers relocating to regional areas.
AMP Capital chief economist Shane Oliver predicts home prices will surge by 5 per cent nationally in 2021, but says inner-city unit prices in Melbourne could fall by as much as 5 per cent.
Home values in every capital city rose in December, for the second month in a row since the pandemic took its toll – with national home values up 1 per cent, according to CoreLogic’s Home Value Index.
It follows the September quarter Domain House Price Report that found house prices rose in every capital city except Melbourne, which was flat.
Dr Oliver expects the upward trend to continue into next year, with some capital cities, including Perth and Brisbane, to experience up to 10 per cent growth.
“The whole market is being driven by low-interest rates, buyer incentives. Obviously, the reopening of the economy and the improvement in the jobs market which are tending to dominate the negatives, such as the hit to immigration, a weak rental market and higher than normal unemployment,” he said.
AMP Capital chief economist Shane Oliver predicts home prices will surge by 5 per cent nationally in 2021, but says inner-city unit prices in Melbourne could fall by as much as 5 per cent.
Home values in every capital city rose in December, for the second month in a row since the pandemic took its toll – with national home values up 1 per cent, according to CoreLogic’s Home Value Index.
It follows the September quarter Domain House Price Report that found house prices rose in every capital city except Melbourne, which was flat.
Dr Oliver expects the upward trend to continue into next year, with some capital cities, including Perth and Brisbane, to experience up to 10 per cent growth.
“The whole market is being driven by low-interest rates, buyer incentives. Obviously, the reopening of the economy and the improvement in the jobs market which are tending to dominate the negatives, such as the hit to immigration, a weak rental market and higher than normal unemployment,” he said.
Dr Oliver also believes Perth will see some of the biggest house price surges of 2021, in line with the “up to 10 per cent” growth he expects to see in some regional areas of Victoria and NSW, within a “two-hour zone” of the city.
“Brisbane I think will also see some strong growth, because they’ve been less impacted by the pandemic and so they’ve got lower debt levels to start with. They’re also playing catch up after a few years of underperforming,” he said.
He expects Canberra dwelling prices to rise by “6 to 7 per cent” and Darwin and Perth prices to increase by “up to 10 per cent.”
“Perth and Darwin are both going to be pretty strong because they’ve had a six-year bear market that only ended several months ago,” he said.
“Perth, in particular, is going to benefit from our iron ore price, which is going through the roof and piping money into the WA economy at a time when its rental vacancy rate has dropped from way above average to way below average, which is often a sign of a shortage of property,” he said.
Economists, including CBA’s Gareth Aird, say their current forecasts for next year take into account the potential for further localised outbreaks of COVID-19, which are likely to see Australia keep its border closed for some time, as well as the possibility of state borders being shut from time to time.
“We’ve had to revise forecasts for the economy quite a bit because of covid restrictions,” Mr Aird said. “And, while there’s nothing about this latest outbreak just yet that’s big enough to shift the dial, it is just a reminder that covid is still there and there is still the risk that you’re going to get these local outbreaks that result in restrictions on activity.”
Source: www.domin.com.au