Commonwealth Bank chief executive Matt Comyn has stuck with the bank’s forecast that house prices are likely to grow more slowly this year as interest rates start rising, and could fall by as much as 10 per cent next year.
As the banking giant painted an upbeat picture on the economic outlook at its half-year results, Mr Comyn said households should be able to manage the potential rise in repayments, which would be “modest” compared with other cycles of interest rate hikes.
House prices surged more than 20 per cent last year, raising concerns about risky lending and prompting regulators to rein in the maximum amount that homebuyers could borrow.
On Wednesday, Mr Comyn said the bank expected slower growth of 4 to 7 per cent this year, with most of the slowdown occurring in the second half of the year.
“We’ve seen house price growth slowing, and expect only modest increases this year before the peak is reached and prices settle,” he said.
The decline in interest rates to record low levels in recent years has spurred on strong growth in mortgage lending, and with many experts now tipping rate rises, economists have predicted property prices could fall next year.
CBA’s economists expect the Reserve Bank will start increasing interest rates from record lows of 0.1 per cent in August, and they have previously predicted house prices would fall by 10 per cent in 2023.
Mr Comyn referred to forecasts for a decline in house prices of 5 to 10 per cent in 2023, adding that forecasts on how house prices would be affected by views on how far the cash rate would rise. CBA economists are betting the cash rate will stop rising in 2023, at 1.25 per cent, which they say would be a “neutral” rate for the wider economy.
“I guess on our basis, given a fairly modest increase in the cash rate over that period of time, I think those sorts of expectations of something like a 5 to 10 per cent reduction in calendar 2023, but on the back of a couple of very strong years, it shouldn’t give customers too much cause for concern,” Mr Comyn said.
National Australia Bank also last week forecast capital city dwelling prices would rise by an average of 2.7 per cent this year, before a 9.3 per cent decline next year, also citing an expected rise in interest rates this year,
Mr Comyn last year said further curbs on the mortgage market may be needed to slow growth, but on Wednesday he talked down the likelihood of further regulatory action.
“We would expect now a period without potentially any further macroprudential policy, but I would say it will hinge upon if our expectation of moderating growth in the housing market and in credit growth is seen,” he said.
Article Source: www.brisbanetimes.com.au
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