Macquarie Equities has joined the residential property market bulls, issuing a report that forecasts 10 to 12 per cent increase in house prices by the end of 2022, with a possible “surprise to the upside”.
And Westpac released details of consumer research yesterday, reporting that the number of prospective first home buyers looking to enter the property market in the next five years has increased from 7 per cent before the pandemic to 16 per cent now.
Macquarie said support for the sector is coming from very low interest rates, improving consumer confidence and the positive impact of government stimulus measures.
It said price growth could be higher “if households take full advantage of the increase in their capacity to pay for housing”.
Another factor is the ongoing intense competition between mortgage lenders.
“Combined with resilient household income and little net change in housing prices in recent years, measures of mortgage repayment affordability have improved markedly,” the report said.
In addition, proposed changes to responsible lending guidelines could support a greater flow of credit. “We expect some moderation of the excessive risk aversion that has crept into some lenders’ mortgage underwriting in recent years.”
According to the Westpac survey, the major incentive for wanting to buy a first home is no longer having to pay rent, followed by seeking a more stable lifestyle and financial security.
First home buyers said they were more optimistic about entering the housing market than they were 12 months ago because of lower prices and low interest rates.
CoreLogic figures show the capital city median house price growing 0.4 per cent in the month of October, following five months of falls. Melbourne was the only one of the state capitals to record a fall in value in October.
Macquarie said the demand for detached housing would be particularly strong, while demand for apartments would be held back by low immigration numbers.
“Our base case is that net immigration starts to slowly pick up next year as border restrictions are gradually eased. A successful vaccine is vital to this assumption. Treasury is assuming that there will be net migration outflow in 2020/21 and 2021/22 but we suspect this will prove too pessimistic,” Macquarie said.