Interest rate announcement – February 2021
The RBA last changed the cash rate in November last year, reducing it to an unprecedented low of 0.1%. This was an unprecedented move from the RBA which reveals that, while the economy has begun to bounce back, the path to full recovery from impacts of COVID-19 is likely to be extended well into next year at least. This month, RBA left the rate on hold at this level and reaffirmed its commitment to continue to help support the economy through this recovery phase.
Residential property prices are rising, and strong gains are forecast for 2021. In this article, we look at key forecasts provided by the big four banks as well as leading property market analysts.
In their Boom and Bust report released in December 2020, SQM’s managing director Louis Christopher says he expects Australian dwelling prices to rise 5.0% to 9.0% over the course of 2021.
He identifies Perth as likely to be the best-performing capital city, with growth of 8.0% to 12.0%, followed closely by Sydney (7.0% to 11.0%) and Adelaide (6.0% to 10.0%).
He predicts the federal government’s JobKeeper program will be maintained beyond March, as employment support will be essential for the ongoing momentum of the housing recovery. However, even if JobKeeper is not extended and another outbreak of COVID-19 cases was to lead to further lockdowns, he believes national house prices would either remain stable or rise by up to 4.0%, with only Melbourne and Hobart facing potential falls.
Australia’s housing market continued along a recovery trend through November and December says CoreLogic, the largest provider of property information and analytics in Australia.
Their national house price index recorded a second consecutive monthly rise for the month, with dwelling values up 0.8%. This follows a 2.1% drop in Australian home values between April and September.
According to CoreLogic’s Head of Research, Tim Lawless, if the current growth trend persists, we are likely to see CoreLogic’s national home value index surpass pre-COVID levels in early 2021.
ANZ Bank’s Research team expects housing price gains of around 9.0% across the nation’s capital cities in 2021. The bank says this market strength is largely being driven by strong interest from owner-occupiers, with low interest rates appealing to buyers in secure employment.
First-home buyers have increased their new loan commitments sharply over the past few months, says ANZ, a story which is consistent across the states. In contrast, investor activity remains soft.
Westpac is more cautious than some other observers about the outlook for the Australian economy in 2021 as delayed effects from the COVID economic shock come through, but the bank predicts activity will accelerate strongly heading into 2022.
The bank’s latest Housing Pulse report tips house prices nationally to rise 4% in 2021 and 10% in 2022. It predicts that this strong momentum will be welcome to begin with but will start to test the nerve of regulators and the RBA in late 2022. That in turn will bring policy responses – macro-prudential measures in particular – back into frame.
Commonwealth Bank of Australia
Commonwealth Bank predicts that provided we don’t see a resurgence of the coronavirus, the strength of Australia’s economic recovery in 2021 will surprise many, and the current positive trajectory of house prices will be sustained across the year.
The combination of low interest rates, stimulus measures and the nation’s successful weathering of the health crisis leads the bank to forecast house price growth of 5% in calendar 2021, albeit with variations from state to state.
National Australia Bank
Home loan applications at NAB were stronger in November than for any other month in the past two years, and the bank has substantially upgraded its forecasts for economic activity and unemployment.
The bank says that while the deterioration that the labour market experienced in 2020 would normally have weighed on prices, strong government support had mitigated the rise in unemployment and the hit to household incomes. On the basis of these developments, NAB’s outlook is for residential property price rises of around 5% over 2021 and 6% over 2022, with house growth likely to out-pace apartments.
Our Current Best Interest Rates
The best home loan rates we currently have available:
- Variable rate of 2.34% pa (comparison rate: 2.34% pa)
- 1 year fixed rate of 1.98% pa (comparison rate: 3.81% pa)
- 2 year fixed rate of 1.89% pa (comparison rate: 2.94% pa)
- 3 year fixed rate of 1.94% pa (comparison rate: 2.37% pa)
- 4 year fixed rate of 1.94% pa (comparison rate: 3.21% pa)
- 5 year fixed rate of 2.19% pa (comparison rate: 3.37% pa)
Assumptions: <$400,000 loan, owner-occupied purchase, principle & interest, LVR < 80%.