Here’s the bank economist’s forecasts for property prices in 2021

Westpac expects Brisbane house prices to surge 20 per cent over two years after the market bottoms out in mid-2021, while Sydney prices could climb 14 per cent and Melbourne prices are predicted to lift by 12 per cent fuelled by record low interest rates and freely available credit.

Here’s Westpac Chief Economist Bill Evan’s thoughts…

Now before you get too carried away…

Currently, many economists who predicted significant price falls are revising their previously more bearish forecasts.

They were wrong then, so why should they be right this time?Well firstly remember there isn’t one property market so broad-brush forecast like this can be misleading.

Each of our cities has a number of markets broken up by location (for example CBD, in the suburban, middle ring suburbs in our suburban); type of dwelling (apartments, townhouses, villa units and houses); new and established properties and different price points.

Clearly not all these markets will perform the same.

However, Westpac sees the recovery in our property markets being supported by sustained low rates, which are likely to be even lower than current levels; ongoing support from regulators; substantially improved affordability; sustained fiscal support from both federal and state governments; and a strengthening economic recovery.

And remember…these lenders have access to a significant database of information and understand what’s happening out in the world of mortgages.

They can see that those who took a mortgage holiday are now beginning to repay their loans and more importantly they’re seeing new home lending increasing.

Here’s how the property cycle will play out

Westpac sees four distinct phases of the housing outlook.

1. Price falls in response to the initial COVID shock – which, apart from Melbourne, are largely behind us.

2. Relatively stable prices in the December and March quarters, with gains possible in some markets although Melbourne will still be experiencing falls in the December quarter.

3. A minor softening in prices through the June and September quarters in 2021 as lenders gradually ease back loan deferrals while seeking to avoid significant market disturbance.These efforts will be supported by ultra–easy monetary and fiscal policy; regulatory support; and ongoing economic growth. Nevertheless, there will be ‘pockets’ of weakness associated with inner–city high– rise markets in Sydney and Melbourne and those overstretched borrowers who will be exposed by the failure of their underlying businesses.

4. The fourth phase will span at least two years when distressed loans from deferrals have worked through the system – and prices react strongly to ongoing low rates; improved affordability; a strengthening economic recovery and policy stimulus.

Dwelling prices are expected to lift by 15% over this two–year period.

Here’s what CBA have to say

CBA was the first of the big 4 banks to upgrade their outlook for our property markets and are now expecting a peak-to-trough decline of more like 5%, which to me suggests there is very little further downside.

They reported…

New lending for housing rose again in August.

A recovery in lending is one factor behind our view that dwelling prices will fall only modestly over the next 6 months.

And we expect dwelling prices to rise solidly in ..the second half of 2021.