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Macquarie bank market update

26 July 2021 | Investment

At Meadows Property Group we like to ensure our clients are up to date with the latest news on market updates. In this article we break down a recent response from the Macquarie Bank on the current market:

House price gains to continue into 2022

Macquarie has upgraded their outlook for Australian housing prices and are now expecting a rise of up to 20% by year end 2022. As many Meadows Property Group clients know, house prices are being boosted by a combination of factors including low rates, a higher capacity to pay and general fear of missing out.

Very cheap credit for an extended period of time will remain a key advantage for housing prices, although rising risks of tighter macro-prudential policies will present a difficult environment. It is important to take note that while the Reserve Bank of Australia has not yet signalled their concern, they will be watching closely over the coming months.

Consumer Confidence and the Economy

Rising house prices are an important channel for consumer confidence and more broadly, consumer spending within the economy. With consumers having a higher capacity to pay, prices have also increased. Capacity to pay is typically gauged using average household income, mortgage interest rates and base assumptions on loan to value and loan maturity. Based on the above metrics, the average households’ capacity to pay for housing has risen noticeably, since 2008, with the decline in interest rates and mortgage rates. This is further supported by household income that has not declined like in a normal recession given the support of unprecedented government stimulus.

Dwelling Values back to Peak Prices

Regional dwelling prices have now recovered to peak 2019 levels, with majority of capital cities also back at peak or not far behind. Sydney dwelling prices remain on track for a near 4% m/m rise in March, which would make it the fastest monthly increase since the late 1980’s. Housing construction and renovations have been strengthened by increased domestic demand and policy support, however, a higher-density housing in metropolitan areas is likely to face headwinds due to weaker net immigration while borders remain closed.

Off the plan – Projects

Over the last 12 months we have seen cashed-up downsizers prevalent in the market looking for new or off plan apartments. High quality developments with large floorplans that they can lock up and leave are in high demand. We are currently working with developers to offer this type of product as has been seen with Oceania in Lorne, Victoria and a soon to be launched Abode – Malvern developments.

While borrowing activity by housing investors has reduced significantly over a short period, it is bouncing back from very low levels and remains well below previous levels. Some forward-looking indicators suggest that housing price growth should soon moderate.

The Meadows Property Group team have an implicit understanding on the current market and can offer extensive advice to suit situation, goal, and circumstances.  Reach out today to talk to one of our team members.

 

Meadows Property Group is an independent real estate agency located in South Yarra, Melbourne.