Property recovery spreads, building approvals may bounce back in late 2020: ANZ

Property recovery spreads, building approvals may bounce back in late 2020: ANZ
Property recovery spreads, building approvals may bounce back in late 2020: ANZ

House prices continue to rise solidly, supported by easier access to credit and lower interest rates, according to the latest ANZ Housing Update report.

The housing update found a combination of pent-up demand and low volumes looks to have been a key driver of the larger than-expected rebound.

While the initial strength was concentrated in Sydney and Melbourne, the pick-up has broadened across the capital cities. In December, prices rose in all capital cities bar Perth (where they were flat) and Darwin.

Looking at the nation as a whole, ANZ predict that prices will rise solidly in 2020 but the pace of monthly gains will moderate.

Felicity Emmett, Senior ANZ economist said, "we have revised up our forecasts a little and now expect prices to rise 8% on average through 2020, and 4% in 2021."

Building Approvals

Building approvals have fallen sharply, driven by a steep decline in high-rise apartment building approvals. Some of this decline can be attributed to the recent cladding and cracking crises which have lead to a lack of faith in apartment developers.

The decline in approvals suggests construction will fall for some months yet.

Felicity Emmett said, "leading indicators are turning, suggesting activity will pick up later this year. Finance for construction, both for households and businesses, is picking up strongly, while property developers are more confident about the construction outlook."

"Build quality concerns, particularly in NSW, may dampen the eventual upswing."

"We expect activity to trough in mid-2020 before picking up," she forecast.

Housing Credit & Loans

 

Adelaide Timbrell, Economist ANZ said, "Housing credit growth is at a historical low of 2.3% y/y, as households use rate cuts to pay down debt faster, rather than reduce repayments. The expiry of interest only loans is also leading to faster debt repayment."

"Recent data suggest arrears rates are now declining, helped by the improved housing market. Despite higher WA arrears and IO loan switching increasing debt repayments by up to 40%, Australian arrears are low by international standards," she added.

First home buyer loan sizes are at historical highs and affordability concerns may emerge as housing prices continue to rise.

Rising rents are squeezing low-middle income earners, who take up an increasing share of the private rental market, atleast when compared to two decades ago.

Tags: 
Building Approvals Property Forecast 2020

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