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Good news for the property market as loan deferrals slow and housing prices tipped to rise

Nov 25, 2020 |ALISON CHEUNG

Predictions of the so-called “financial cliff” many economists feared during the height of COVID-19 may have missed the mark.

The number of deferred loans has fallen to below 300,000 in November 2020, the latest data from the Australian Banking Association showed.

This is a reduction of almost 70% since the peak earlier this year, when Aussies put more than 900,000 loans worth more than $250 billion on hold.

Currently, about $86 billion worth of loans are on pause.

Value of loan deferrals 29 April – 4 November 2020

Source: Australian Banking Association

And as six-month deferrals come to an end for more borrowers, the ABA expects a further drop in the number of deferred loans in coming weeks.

Real Estate Institute of Australia President Adrian Kelly said the drop in loan deferrals was not just good news for the property market, but also for renters and prospective buyers.

“This is good news for those living in investment properties as it provides increased security to tenants,” he said.

“It also means catastrophic forecasts for Australia’s housing market made at the start of COVID-19 are simply not coming to fruition so customers should have increasing confidence to buy and sell.”

Confidence in the housing market picks up as NAB lifts price expectations

It’s not the only positive news feeding into Australia’s property markets in recent weeks.

NAB has noticeably dialled up the optimism in its view on what they believe will happen to property prices.

The headline figures in the big four bank’s latest market predictions for the September 2020 quarter show that it now expects housing values to jump by around 5% over 2021 and 6% over 2022.

In the June 2020 quarter – when the doom and gloom of the pandemic was in full swing – NAB was predicting prices to fall by -4.6% in 2021 and -4.3% in 2022.

In Sydney, prices are expected to increase by 4.4% over 2021 and 6% over 2022.
Compared with the previous projections of price falls of -4.7% and -4.9% respectively, this is a notable improvement.

Melbourne is expected to rise by a slightly lower rate, with forecasts at 3.6% and 5.4% in 2021 and 2022 respectively, compared with the previous predicted drops of -7.3% and -6.5%.

However, housing prices in Melbourne are still expected to edge down by -2.2% over the entire 2020.

Interestingly, it is Brisbane, Adelaide and Hobart which are tipped to see the biggest price growths of 7.4% over both 2021 and 2022.

NAB believes price growth for houses is likely to be stronger than that of apartments.

Market predictions revised up thanks to government's COVID-19 support

The bank said it upgraded its housing price forecasts after recognising that the property market has held up “substantially better” than they expected.

“While the deterioration in the labour market would normally weigh on prices, the significant government support has mitigated the rise in unemployment and hit to household incomes,” NAB said.

However, weaker population growth was one downside noted by the bank.

“We see the sharp slowdown in population growth due to border closures as the key risk to house prices, particularly for Sydney and Melbourne.”

Yet with the official cash rate at 0.10%, NAB believes lower interest rates for an extended period will act as a driver to the real estate market in the next few years, which could fuel price growth across the country.

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ALISON CHEUNG

Alison has written about property since 2015. Her work has been published by NewsCorp, Domain and Business Insider. Alison is motivated to help Australians make better property investment decisions.

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