The two biggest banks in Australia have forecast house prices to rise by ten per cent or more this year.
The Commonwealth Bank CEO Matt Comyn has upgraded the bank’s property price forecast off the back of recent market activity.
“We were thinking 8 per cent and we are now thinking 10 per cent,” he told Australian Financial Review.
Westpac CEO Peter King was also upgrading his bank’s forecast, extending the forecast for sustained growth by another 12 months.
“We have a forecast of 10 per cent housing price increase for this year and next year,” he said.
Regulators are keeping close watch on the booming housing market, but Mr Comyn said it was important not to portray rising prices as a problem, but as a sign of strong economic rebound.
“The recovery in the labour market is, in one word, miraculous,” he told AFR.
The ongoing low interest rates are driving market activity and also letting people pay off loans faster and giving banks confidence that too much risk wasn’t being built up in the system.
Westpac’s Mr King said getting first-home buyers into the market was a big issue and this year’s property boom was different to last time around.
“If we look at high loan-to-value ratio, interest-only and investor lending…these three are much lower than we saw at the last peak and up little bit, but not too much, on the last six to 12 months.”
The statistics indicate that this year’s boom is more about owner-occupiers, who are behind around three quarters of applications.