State Budget Predicts Hike in House Prices to Peak Towards End of Year | County Chief of St George and Sutherland
The state budget expects house prices to skyrocket towards the end of this year.
The budget also projects that the home improvement boom will end in 2022 with the reopening of borders and people start spending again on travel abroad.
“A strong labor market has combined with low interest rates to increase the number of real estate transactions, house prices and construction activity, despite the absence of further migration,” the budget documents said. .
“Activity was also boosted by the Commonwealth’s HomeBuilder program.
“House prices in Sydney have increased by more than 20% since the start of the pandemic.
“Renovation activity was also strong, as households redirected money from vacationing abroad to home improvements.
“So far, these factors have been more than enough to offset the impact of lower population growth.
“The current strength of the housing market, in terms of price growth and new construction, is mostly reflected in homes rather than units.
“Until recently, it was mainly driven by demand from homeowners.
Budget documents said government policies were supporting first-time homebuyers, with an increase in first-time homebuyers activity in the second half of 2020.
“The number of transfer tax benefits for first-time buyers increased by more than a third in the second half of 2020 (to nearly 25,000), compared to a year earlier.
“The annual growth in house prices is expected to peak towards the end of 2021.
“As the higher prices encourage more homeowners to sell, this will help limit the growth in house prices over time.
“In addition, higher prices should lead to more potential buyers, weighing on demand.”
The government has rejected speculation that rising house prices could cause interest rates to rise sharply.
“The concentration of loan growth in homeowner (rather than investor) loans suggests that current market conditions are less likely to elicit a response from regulators,” the budget documents said.
“For now, a significant macroprudential tightening is assumed unlikely, although that would change if hedge lending to investors were to increase significantly.
“A major intervention would lead to a downward revision of house prices
relative to the baseline, with broad implications for the economic outlook.
“Residential construction is expected to remain strong in the very near term, fueled by rising house prices, continued political support and low interest rates.
“Meanwhile, demand for renovations is expected to decline in 2022, as discretionary household spending is redirected to international travel once the border reopens. “