Australia's house prices are set to endure a mild COVID-19 dip before surging by 15 per cent over the next two years, some of the nation's top economists have forecast.
Westpac's Chief Economist Bill Evans and Senior Economist Matthew Hassan argued in a forecast bulletin that the property market will cement most of its losses between April and June next year.
After that, the market is then tipped to rapidly accelerate with a total expected increase of around 15 per cent.
Both Mr Evans and Mr Hassan said they anticipate most capital city markets to be resilient in the face of the pandemic, with Melbourne (dropping 12 per cent) and Sydney (dropping five per cent) to be hit hardest.
"We now expect many capital city markets to be more resilient with a national fall of 5 per cent between April and June next year, distributed between: Melbourne (–12 per cent); Sydney (–5 per cent); Brisbane (–2 per cent); Perth (flat); and Adelaide (2 per cent)," the economists wrote.
"Of most importance is that we are much more optimistic about the pace of price appreciation over the following two years with a total expected increase of around 15 per cent."
The pair argue that lower interest rates, a mild recession and loan repayment holidays will all act as price superchargers to both increase property prices in growth markets and protect current values in currently risky areas such as Melbourne.
According to their outlook, both Mr Evans and Mr Hassan see the property market reacting to the pandemic in four distinct phases.
The first is an initial "COVID shock", in which prices fall. Both economists believed that with the exception of Melbourne most of the property price plunges had already taken place.
The second phase is a stabilisation of the capital city markets through the December 2020 and March 2021 quarters.
The third is a minor softening of prices through to September 2021, followed by a fourth phase of two-year growth.
"The fourth phase will span at least two years when distressed loans from deferrals have worked through the system – and prices react strongly to ongoing low rates; improved affordability; a strengthening economic recovery and policy stimulus," the economists write.
"Dwelling prices are expected to lift by 15 per cent over this two–year period."
Australia's August 2020 Property Prices*
City: | Quarterly change: | Median Value: |
Sydney | - 2.1 per cent | $860,182 |
Melbourne | - 3.5 per cent | $667,520 |
Brisbane | - 0.9 per cent | $503,128 |
Adelaide | - 0.1 per cent | $444,021 |
Perth | - 1.6 per cent | $443,777 |
Hobart | + 0.3 per cent | $490,743 |
Darwin | + 1.0 per cent | $393,386 |
Canberra | + 1.3 per cent | $636,324 |
National | - 1.7 per cent | $552,689 |
*CoreLogic Data, median value includes homes and units
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