Westpac doesn’t expect house prices to drop until late 2022

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Westpac economists don’t expect house prices to start falling until the end of 2022.

The bank’s chief economist, Michael Gordon, expects real estate price growth to “slow” dramatically over the next 12 months due to tax changes designed to make real estate investing less profitable .

But house prices would not start to fall until after the Reserve Bank started raising the official exchange rate (OCR), which it reduced to boost the economy in the face of the Covid-19 pandemic.

“Previously, we expected OCR increases to be delayed until early 2024,” Gordon said.

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“Our concern was that rate hikes as early as next year would lead to unacceptably low inflation and employment results for the Reserve Bank,” Gordon said.

But he was now more confident that the economy was strong enough to deserve the removal of emergency measures to stimulate it last year.

Westpac now expects house prices to drop by the end of 2022.

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Westpac now expects house prices to drop by the end of 2022.

“The economy seems to have weathered the ‘tourist-free summer’ better than expected and has come out of this phase with considerable momentum,” he said.

“The 1.6% increase in GDP for the March quarter was much higher than expected, and while we have questions about how long this surprise will last, we believe at least part of it was genuine,” a- he declared.

Business activity and retail spending were also positive for the June quarter, he said.

Unemployment continued to fall and hit 4.7% in the first three months of the year, and Westpac expects it to fall to around 4% by the middle of next year.

Already, the home loan market was starting to send signals to borrowers that mortgage rates will rise.

“We expect floating rates and shorter fixed-term rates to be stable over the next few months,” Gordon said.

“Long-term interest rates are now rising in response to the improving economic outlook,” he said.

He said that given the bank’s forecast, longer-term fixed rates of three to five years no longer offered good value, compared to borrowers taking a short-term rate now and re-fixing later at a rate. higher rate.


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