Gareth Aird CBA
Gareth Aird, CBA. Photo – CBA.
  • CBA was predicting property price falls of 30% or more in May last year
  • The Bank's economists are now forecasting 16% growth for house prices this year
  • Units should rise 9%; 'all' indicators are 'pointing in the same direction'

Momentum in the Australian property market has surged and leading indicators point to strong price rises.

Gareth Aird, Head of Australian Economics at the Commonwealth Bank (CBA) is now predicting 16% growth in the housing market over the next two years, and average price rises of 9% for units.

This is in stark contrast to just nine months ago, mid-pandemic, when the CBA were forecasting drops of more than 30%.

By September 2020, the bank was one of the first commentators to be changing their tune on the property market, predicting strong growth.

“Prices are now rising in all capital cities,” said Mr Aird on recent CBA podcast, “In fact, they are rising quite quickly.

“Lending started picking up towards the end of last year, turnover is up, clearance rates are up. So everything is pulling together… things are looking quite strong at present.”

New home lending – and lending in general – is a leading indicator for property prices, argued Mr Aird.

“It’s quite intuitive if you think about it. The money that people borrow ends up going into the housing market, and that pushes up prices.

“There is a tight historical relationship between the annual change in lending and the annual change in dwelling prices, with about a six-month lead (time) from lending,” he said.

“In the past six months, lending has picked up quite significantly, … and so that is feeding into higher prices now.”

Interest rates, already at historical lows, may not move higher until 2024, according to information from the Reserve Bank of Australia (RBA). So lending has never been cheaper.

“Once the property market gets on a roll, it becomes self-perpetuating,” said Mr Aird, “One thing we look at are auction clearance rates, and they are very firm at the moment, sitting in the eighties per cents, which historically has been associated with double-digit property growth.”

Various other measures are also pointing to an expectation of a continued surge in house prices.

If people are expecting to see house prices rise – and then they do – this helps validate their expectations, and keeps the momentum going, Mr Aird argued.

“All indications seem to suggest that house prices will rise faster than at any time in the past ten years, according to our model,” he said.

More research from CBA’s Housing Spending Intentions also suggested further reasons for continued property price increases.

Risks remain, both to the upside and the downside, but overall they are skewed to the upside. More lockdowns or sustained outbreaks could stop the momentum, and could be a downside risk. So might the RBA raising interest rates, if they felt the economy was running too hot.


Before investing in any asset, please do your own independent research, taking into account your own personal financial situation. This article does not purport to provide financial or investment advice. See our Terms of Use

You May Also Like

Australian housing market upswing extends into the New Year

Positive price momentum rippled into 2024 as CoreLogic’s latest results show a rise in dwelling values.

Australian home values hit a new high in November, marking a V-shaped return to form

November marks a triumphant return for Australian home values, soaring to unprecedented heights, signaling a robust market rebound.

More properties are selling below estimated prices

Properties are selling below estimates in all states suggesting that buyer sentiment has declined

Residential prices, volumes expected to decline in 2023: HTW

Once inflation and interest rates peak, greater consumer confidence should stabilise the residential property market in late 2023.

Top Articles

PropertyGuru Asia Property Awards (Australia) returns for its 7th edition, including several brand new award ...

This year's awards include several brand new categories, with entries closing 2 August 2024.

Rentvesting in Australia: A deep dive

Rentvesting offers an alternative path into the property market for priced-out first-time buyers.

Housing crisis survival guide: How to buy your first Australian property

Three property experts give the low down on how to nab a home in this tough housing market.