NAB has again upgraded its expectations for price growth in Australia’s booming housing market, with CEO Ross McEwan reportedly declaring prices could spike “in excess” of 10% nationwide by the end of 2021.
The Australian reports McEwan delivered that forecast to the House of Representatives Standing Committee on Economics on Friday, surpassing the bank’s February estimates of “around 8%” growth in 2021, and a revised claim of up to 10% growth by year’s end.
McEwan’s declaration is backlit by the sharpest uptick in housing prices recorded in three decades, with median house prices in Melbourne and Sydney jumping by tens of thousands of dollars in a matter of months.
According to CoreLogic data, Melbourne’s median house price stood at $859,097 on April 1 – an increase of $22,000 since February.
Meanwhile, Sydney’s median home price sat at a bewildering $1,112,671, marking more than $50,000 in growth in just one month.
NAB’s newest claim bring the institution closer to forecasts from its Big Four competitors.
ANZ has predicted a stunning 17% rise in Australian house prices by the new year, while Commonwealth Bank and Westpac have predicted 16% and 20% increases by the end of 2022, respectively.
Those forecasts come as interest rates scrape rock bottom levels, and after government incentives, like the $2 billion HomeBuilder subsidy scheme, ushered a new wave of buyers into the market.
CoreLogic also pointed to the intangible “fear of missing out”, which has coupled with low levels of housing stock to become a potent market accelerant.
Despite the influx of new lending and panicked entries into the housing market, The Australian reports McEwan has pointed to the depletion of housing supply as the primary bottleneck driving prices skywards.
“Without decisive moves to increase housing supply, demand side incentives will inevitably act to push up house prices further and faster,” McEwan said.
The Reserve Bank of Australia (RBA) has acknowledged it is not primarily focused on housing prices, but it has acknowledged that asset prices are “rising beyond fundamental values”, noting that “risks from rising asset prices and debt could build.”
Economists have also speculated the Australian Prudential Regulation Authority may be spurred into action if the market continues its incendiary run.
However, the RBA has indicated it won’t raise rock-bottom cash rates for three years, meaning cheap money may continue to flood the market.
For now, would-be homebuyers find themselves in a bruising situation: either pay above the odds now to escape the 10% price hike predicted by NAB, or wait until housing supply meaningfully increases – by which point, the interest equation may be totally different.