One of Australia’s biggest banks, NAB, has revealed a new 2021 property growth forecast for Sydney, lifting its previous May estimate of 17% to 21.6%.
The forecast is good news for existing homeowners but potentially more bad news for young Aussies already struggling to get a foot on the property market.
The eye-watering levels of growth already seen this year have started to scare off first home buyers, with the latest ABS figures showing the number of first buyer loans dropping for the fourth consecutive month.
NAB also revealed growth updates for other capital cities, with Melbourne property values predicted to grow by 17.6%, up from a prediction of 16.2% in May. Brisbane may see growth of 19.6 per cent, Adelaide by 17.4 per cent, Perth by 11.6 per cent, and Hobart by 23.5 per cent.
And for cities like Hobart, these growth levels may only further increase the gap between young people and homeownership, with the current Tasmanian market described as a “housing crisis” by many.
First home buyers feeling priced out may only need to hold off for a short while for the next drop, as NAB further predicted these gains in capital cities to cut in half by 2022.
According to the AFR, NAB economists led by Alan Oster said the current low interest rate environment and strong income support which “fuelled strong price growth” in 2021, may begin to fall in 2022.
“NAB has revised up its forecast for house prices in 2021 based on the faster than expected growth in prices over recent months,” wrote NAB economists.
“From here we see the monthly pace of growth slowing but continuing at a solid rate. Affordability constraints will likely begin to bind over the year and see a slowing in price growth as the impact of lower rates fade.”
“We remain optimistic that as restrictions are eased, activity will rebound as has been the case in previous lockdowns,” wrote NAB economists.
“Dwelling prices continued to grow at a robust pace in June, with the combined capitals rising by 1.9 per cent over the month.
“While slightly below the May pace, monthly growth remained the range it has been since February. This is also true of Melbourne despite the lockdown over much of the first half of the month, suggesting short-lived lockdowns are unlikely to significantly slow the market,” wrote NAB economists.
Considering accessing the equity in your property?
If you’ve already purchased property and you’ve seen the value of your home increase, you may be wondering if you can access any of this equity for personal use.
One of the most common ways borrowers who’ve experienced property value growth can access their increased equity is through a home equity loan. A home equity loan may be useful for a variety of purposes, including paying for home renovations, buying a car, funding a wedding or taking the family on a holiday.
A home equity loan typically offers borrowers funds in the form of:
- A line of credit – like a credit card, borrowers draw down on a pre-approved credit limit based on the equity in their home and pay interest on funds borrowed.
- A lump sum – like a personal loan, borrowers may use equity in their home as security to borrow money.
Keep in mind that by drawing down on extra cash you pay into your home loan or increasing your loan by borrowing against your equity, you may find your mortgage repayments have increased. This may be because your home loan amount has now increased.