ANZ Downgrades House Price Forecasts Amidst Easing Growth Trends

Highlights:

• ANZ downgrades house price forecasts for Sydney and Melbourne amidst faster-than-expected easing of price growth in 2024.
• Higher interest rates impacting Melbourne and Sydney markets more than anticipated, leading to slower price growth.
• Despite adjustments, rebound in clearance rates indicates potential upside for housing values, particularly in Sydney and Melbourne.

Sydney and Melbourne Projections Adjusted

ANZ has revised its house price forecasts for Sydney and Melbourne downwards for 2024, citing a faster-than-expected easing of price growth since the year began. Sydney's housing market is now expected to see a rise of 4 to 5 per cent, down from the earlier forecast of 6 to 7 per cent, while Melbourne's growth is projected at 2 to 3 per cent, smaller than the initial estimate of 3 to 4 per cent.

Impact of Interest Rates

According to Adelaide Timbrell, a senior economist at ANZ, higher interest rates are impacting these markets more than anticipated, leading to a slowdown in price growth. Despite this, a slight increase in auction clearance rates in January and early February suggests continued growth, albeit at a slower pace.

Regional Variances

Perth, which outperformed in the past year, is expected to see higher gains, with house prices predicted to increase by 10 to 11 per cent, up from the earlier forecast of 7 to 8 per cent. Adelaide's forecast has also been adjusted upwards to about 8 per cent, reflecting strong demand and housing shortages in these regions.

National Outlook and NAB's Projections

ANZ maintains its national forecast at 5 to 6 per cent, while NAB has also adjusted its projections, with Sydney and Melbourne seeing reductions and Brisbane, Adelaide, and Perth receiving upgrades. NAB predicts Sydney to increase by 4.7 per cent, Melbourne by 2.6 per cent, Brisbane by 7.7 per cent, Adelaide by 6.4 per cent, and Perth by 9.9 per cent.

Potential Upside

Tim Lawless, CoreLogic's research director, suggests that despite the adjustments, there could be upside surprises, given the strong start to the year in sales. The rebound in clearance rates points towards potential higher prices in the coming months.

Market Response

Sydney's home values rose by 0.4 per cent, and Melbourne's by 0.12 per cent over the past four weeks, indicating resilience amidst the adjustments. Despite a slight dip in national clearance rates, they remain substantially higher than the same period last year, hinting at continued market strength.

Overall, while adjustments in forecasts reflect current market dynamics, the rebound in clearance rates suggests optimism for future growth in housing values, particularly in Sydney and Melbourne.

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