Westpac forecasts rapid housing market snap-back once lockdown restrictions ease
Australia’s housing markets are entering "very tricky territory" as the return of major virus disruptions combine an extraordinary boom starting to run into affordability constraints.
But Westpac senior economist Matthew Hassan anticipates a temporary loss of momentum rather than a correction was impacting housing markets, and a rapid snap-back was likely once lockdown restrictions ease.
"Risk aversion remains elevated," he said.
"The combined signal remains positive for now but looks susceptible to slowing.
“Thin trading means some sub-markets will be more susceptible to weakness near term, particularly where economic pressures are intense and the virus outlook uncertain," Hassan said.
"However, thin trading also means even lower ‘on-market’ supply that could be a bigger issue once activity rebounds.”
The latest Westpac Housing Pulse noted broader consumer confidence had taken a substantial hit but is holding up compared to last year’s major lockdown episodes and vaccine availability providing a key support.
"For housing, surging prices and stretched affordability look to be far more important than COVID considerations," the report noted.
The Westpac Melbourne Institute ‘time to buy a dwelling’ index dropped 14% over the three months to August after a similar decline over the previous three months.
The index has now slumped by nearly a third from its November high, with August marking the second lowest read since 2010.
"The steep fall is a clear warning that deteriorating affordability is starting to weigh heavily on buyer sentiment amongst owner occupiers," Hassan said.
