House prices ‘up faster’ than forecast

ANZ economists say house prices could increase by 8 per cent this year compared with last year.

Its latest property market research shows house prices have rebounded faster than economists and the Reserve Bank expected.

Prices rose 6 per cent nationwide over the second half of 2019.

‘‘Further strength is expected in the short term, on the back of lower mortgage rates, and with population growth continuing, supply tight and headwinds easing a little,’’ the economists said.

House prices could be rising by

8 per cent year-on-year by June before tailing off again.

‘‘The effects of policy changes are still being felt and the election will provide some uncertainty but credit is now less of a constraint and there appears to be renewed confidence ... We expect house price inflation to reach 8 per cent year-onyear before moderating.’’

While population growth might soften, it would continue, they said.

The favourable tax treatment of capital gains would mean the property market would also attract money. House price growth would flow through to consumption, residential investment and GDP (gross domestic product) growth in coming years, the bank economists said. That made it less likely the Reserve Bank would cut the official cash rate again.

But Gareth Kiernan, chief forecaster at Infometrics, said the strong finish to 2019 could mean there was less scope for prices to be pushed up further over the next

18 months. He said prices could be about 4 per cent higher than had been expected by mid this year.

Inflation would probably be

5.9 per cent by mid-2021, he said.