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Following the release of ANZ’s property forecast for the final months of 2022, Hayden Groves has opined that the numbers may not be what they seem.
In an opinion piece published on his agency’s website, the Real Estate Institute of Australia (REIA) president urged industry insiders and consumers not to take economists’ predictions as the final word.
The Perth property professional used the bank’s outlook on his city’s market trajectory as a particular example of how many factors might be overlooked in the type of broad property analyses such as ANZ recently released.
“I think ANZ (and the other big banks) have got their prediction about Perth’s property market badly wrong,” the dethridgeGROVES principal said bluntly.
“In short, they reckon Perth property values will inevitably follow east coast markets in a downward trajectory through to the end of next year, predicting Perth home values will fall by 7 per cent. NAB reckon Perth values will dip 11.4 per cent,” he explained.
“Sadly, this is yet another example of an east-coast based bean counter squirrelled away in a back room handed the task of predicting our local property market from afar.”
Mr Groves pointed to several reasons why he feels Perth’s market could take a different direction from what some of the major financial institutions are projecting.
An expected interest rate peak followed by an eventual decline is one such facet.
“It is widely predicted interest rate rises will settle within the next nine to 15 months, leaving a typical variable mortgage rate of about 5.8 per cent; historically relatively low. At this level, this will add about $880 per month to the average Perth mortgage compared to their lowest point,” Mr Groves said.
He argued that at that rate, Perth residents would fare much better than their counterparts in larger cities, such as Sydney, who will be facing roughly $1,750 per month added to their mortgage. Where distressed sales might rise in the more expensive capitals, Perth residents should be able to manage the hike.
“Perth remains the most affordable capital city in Australia at a median house price of $585,000. Adelaide is next on the list at $699,000. Our average of 26.6 per cent of earnings going to service our mortgage is well below the national average of 37.3 per cent,” he noted.
Migration, he said, was also moving in the right direction.
An inflow of new Perth residents was “keeping demand for housing strong in an under-supplied market,” Mr Groves opined.
“Overall, for-sale listings in Perth are 14 per cent below this time last year and 32 per cent below the five-year average. At the same time, sales volumes here remain strong, up a whopping 52 per cent on the five-year average.”
Furthermore, Mr Groves believes that not only will Perth’s prices remain stable, but that its small fluctuations in relation to the rest of the country will further bolster the city’s prospects.
“As east coast markets tank, surely people will look west to take advantage of our enviable lifestyle and relatively cheap housing,” he said.
And for those who believe that the banks still know best, the industry veteran cautions that it would be wise to learn from recent history.
“I recall when COVID-19 first hit, all the banks thought Australian property values would fall an average of 20 per cent,” he noted. “They were about 40 per cent out.”
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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