Big Four bank report suggests that house prices may well have peaked

by Mike Wood22 Nov 2021

ANZ has predicted that the housing market boom will last until the end of next year before falling early in 2023.

The Big Four bank released research from its independent economic team that suggests that the more than 20% year-on-year price growth that has been seen in 2021 would slow to just 6% in 2022 and then drop 4% in 2023.

The report cited concerns over housing affordability, increasing interest rates and a rise in supply via listings will see prices flatten out and then drop slightly.

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“House price growth looks likely to peak in November or December 2021 at just above 21%,” read the report, which was written by ANZ leading economists Felicity Emmett and Adelaide Timbrell.

“This would be the strongest growth since the late 1980s boom. But a slowdown is in sight, with tighter credit, rising fixed mortgage rates and a large increase in stock on the market combined with decreased affordability all set to dampen price growth in 2022.”

“In 2023, we see prices falling modestly as higher fixed rates really start to bite.”

The accompanying construction boom will also likely taper off, with the end of government stimulus the key driver in the decrease.

“We expect housing construction to grow close to 13% this year, with further gains in H1 2022, before activity brought forward by government incentives starts to dry up,” said the report.
“Reduced capacity on building sites in NSW and Victoria as a result of lockdowns and social distancing requirements has pushed some activity from 2021 into 2022, and there is still a large pipeline of work to keep home builders busy for the rest of 2021 and into 2022.”

“Once that pipeline dries up, construction activity looks set to decline, although the rise in apartment approvals should cushion the fall.”

“After a massive lift from the HomeBuilder program, house approvals are now unwinding, falling 33% since the peak in April.”

“Leading indicators suggest further more modest falls in coming months: HIA house sales have largely returned to pre-pandemic levels, and housing finance for the construction of new homes is down 45% from the peak in February. Offsetting some of this weakness has been a lift in unit approvals.”