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Housing Prices- September 2020

While housing prices have taken a beating since April, largely from COVID-induced reductions in demand, a 15% appreciation in the price of dwellings is expected alongside improving optimism among several of Australia's key markets.

Westpac has identified two significant drivers of improving stability in the near term. Firstly, sustained lower interest rates into 2021 will continue to support lower mortgage rates for owner-occupier loans, having declined from 4.25% to 3.65% over the past 12 months. With the current 0.25% cash rate effectively declared as the lower bound, this has placated investor fears as to further revisions in mortgage rates in the near future.

A milder recession has further bolstered the housing market as we move into the fourth quarter of the year. Core components of Australia's recovery narrative have included ongoing fiscal support and improved affordability across the economy, which can be expected to feed into growing appetites for housing by the year-end. With the projected appreciation in housing prices and broad-based improvement in Australia's growth outlook, we can expect some of the stress in the housing market to be eased once the economic benefits of the wealth effect come into fruition.




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