Economists predict housing prices to peak this year

The non-stop rise in house prices may hit an apex this year, according to the latest expert housing predictions from Finder based on surveying 40 economists and property experts each month to forecast the central bank’s next cash rate decision. 

While all experts and economists surveyed this month expect the cash rate to hold at 0.10 percent, the majority of those who weighed in on New South Wales property prices, a whopping 68 percent expect property prices to peak this year. 

Around 39 percent expect house prices will peak in the final quarter of the year, while nearly a third 29 percent believe prices will peak within the next three months.  

The remaining 32 percent think prices won’t peak until 2022 or beyond. 

According to ABS data, after borrowing a record $48 billion for housing in the first 4 months of 2020, Aussies borrowed $75 billion in the first 4 months of 2021.  

Graham Cooke, head of consumer research at Finder said the rising property prices have led to unprecedented borrowing.  

“Aussies borrowed $27 billion more for housing from January to April this year compared to last – and last year was a record,” he added. 

“Many feel that these increases can’t keep going indefinitely and our panel tends to agree. Expect the current rise in prices and activity to peter out by 2022. 

“For first time buyers, this means that the bottom rung of the housing ladder should stop becoming steeper within the next six months.” 

Housing is unaffordable for the average Australian. 

Despite predictions that the housing market may peak before 2022, a solid 78 percent of economists agreed that housing is becoming unaffordable for the average Australian, with some experts blaming wage growth and extremely low rates. 

Tony Makin of Griffith University warned that a real estate bubble is emerging due to extremely low interest rates. 

Shane Oliver from AMP Capital said this problem has been an issue for 25 years. 

“For the average Australian first home buyer, housing affordability has been deteriorating since the mid-1990s,” he said. 

Cooke said next year is shaping up to be better for affordable housing than 2021. 

“Positivity around housing affordability is still low, but if expert predictions of prices peaking later this year are true, 2022 could prove a much better year for housing affordability.  

First home buyers would get a $25,000 grant to help them enter the market in New South Wales yet not all respondents agreed with the grant. 

More than half of respondents believed that the new $25,000 first home buyers grant should not be implemented in other states, due to fears that it could increase property prices even further. 

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