Westpac's full circle - forecasting 15 per cent house gains post COVID

Westpac economists have gone full circle in their house value forecasting, with prices to soar from December 2021.

They had been expecting between April 2020 and June next year, the national price index to fall by 10 per cent.

But last week they updated their forecasting, stating prices would only drop five per cent between April and June next year.

There have already been -2.3 per cent declines nationally, according to CoreLogic's data.

And now they're forecasting a much stronger rebound, accumulating 15 per cent over the two years from December next year.

"Apart from Victoria, where we expect prices to fall in the December quarter, we expect that in the December and March quarters in the other states, prices will be relatively stable with some upside pressure."

Evans says the June quarter and September quarter 2021 when markets have to deal with $240 billion of deferred loans currently on the balance sheet of the banks.

"That's about 620,000 borrowers, $180 billion in mortgages", Evans says.

"It's our view that risk will be well managed", Evans suggests, adding that there will be restructuring of loans, banks will be patient, and at the time there will be modest downward pressures on prices.

"But broadly speaking, The sort of fears that some of had, that that phase will be a very negative phase for house prices, I think will be unfounded."

Evans says the final phase will be that interest rates are at record lows, the overhang of the deferred loans will be behind us, and the central bank and the government will be focused on the economy, not on constraining bank lending or on over regulation

"That will be a very positive environment for the housing market."

To listed to Westpac economist Bill Evans full update, watch below.