Australian house prices will rise again in 2024 as a return to pre-pandemic immigration levels will boost demand for property, according to a ratings agency.
Big banks expect house prices to fall in 2022 and 2023 as further Reserve Bank rate hikes constrain banks’ lending capacity.
However, Moody’s Investors Service predicts that a gradual rise in immigration to pre-Covid levels will boost home demand, particularly in Australia’s largest cities of Sydney and Melbourne, which were more dependent on population growth before the pandemic.
“We believe there are still solid fundamentals for the residential sector beyond the next year or two,” it said.
Property prices in Australia will rise again in 2024 as immigration recovers to pre-pandemic levels will boost demand for property, a ratings agency says (pictured is an auction in Glen Iris, a suburb of Melbourne).
“The strong rebound in overseas net migration in fiscal 2022, and our expectation that it will return to pre-pandemic levels in fiscal 2023, will bring population growth rates close to long-term averages.”
The rating agency found that high immigration had long been the main reason for rising real estate prices.
“Population growth has been a key driver of demand for new housing in Australia, with net overseas migration historically accounting for more than 50 percent of demand,” said Moody’s Investors Service.
‘Housing prices and volumes will continue to fall as interest rates rise, but population growth and limited supply will support longer-term fundamentals.’
Australia’s annual net immigration rate was 194,000 in 2019-20, the most recent fiscal year covering the pre-pandemic period.
The closure of Australia’s border in March 2020 caused the September quarter’s population to shrink for the first time since 1916.
Moody’s Investors Service predicts that a gradual rise in immigration to pre-Covid levels will boost home demand, particularly in Australia’s largest cities Sydney (Wynyard train station pictured) and Melbourne, which were more concerned with population growth before the pandemic
But the reopening of Australia’s border to migrants in December last year has prompted a gradual surge in immigration numbers.
In the year to September, Australia’s annual net immigration rate was 148,980 when permanent and long-term departures of 529,180 were subtracted from annual permanent and long-term arrivals of 678,160.
For more than two months of this period, Australia was still closed to migrants and international students, so upcoming data from the Australian Bureau of Statistics is likely to show an increase in net overseas immigration.
Pre-pandemic annual net immigration was steady at nearly 200,000, reaching levels well above the 20th-century average of 70,000.
Westpac expects property prices in Sydney and Melbourne to fall by 18 percent in 2022 and 2023.
Should these predictions come true, the correction in Sydney would cause the city’s average house price to fall by $137,497 this year, from $1,374,970 at the end of 2021, before falling another $98,998 to $1,138,475 in 2023 .
That 18 percent decline would represent a destruction of $236,495 over two calendar years based on CoreLogic data.
Melbourne was also expected to suffer an 18 per cent contraction, with an 8 per cent fall in 2022 followed by a 10 per cent fall in 2023, with Westpac noting that it was “more vulnerable to rate hikes and a slowdown in the economy.” migration”.
Westpac expects house prices in Sydney and Melbourne to fall 18 per cent in 2022 and 2023, but predicts a rebound in 2024 as interest rates are cut again
Such a scenario would result in a $79,834 drop this year, from $997,928, followed by another $91,809 drop in 2023.
The median house price would fall by $171,644 to $826,284 over two years in this scenario.
Westpac expects the Reserve Bank to hike interest rates from an existing nine-year high of 2.85 percent to an 11-year high of 3.85 percent by May 2023.
However, the RBA is expected to cut rates again in early 2024, again to 3.6 percent by March this year and 3.35 percent by June 2024.
Westpac continues to see house prices rising again in 2024, with smaller increases of 1 per cent in Sydney and Melbourne and larger increases of 3 per cent in Brisbane, Perth and Adelaide.
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