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AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

(ANZ)
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ANZ Raises Australia House-Price Forecast Despite Covid-19 Storm

08/25/2021 | 01:07am EDT

By James Glynn

SYDNEY--Despite growing doubts about the outlook for the Australian economy as lockdowns cripple business activity in major capitals, the country's property market remains seemingly bulletproof, with ANZ moving Wednesday to further upgrade its forecasts for house-price growth.

ANZ, one of the country's big four mortgage lenders, is looking through the prospect of a big contraction in gross domestic product in the third quarter and talk of a recession, to forecast house-price gains in 2021 of more than 20%.

Prior to the upgraded forecast, ANZ anticipated gains of 15% to 20% for the year. That pace is likely to slow to 7% in 2022, as regulators are expected to put the brakes on surging mortgage lending.

"The market remains tight, with the combination of strong demand and low supply pushing price higher," the bank said.

Housing finance has risen 83% in the year through June, while investors are returning to the market in larger numbers.

In the six months to June, lending to housing investors rose 55%, more than double the growth rate of a year earlier, ANZ said.

More people are also seeking detached houses because they are working from home during the pandemic, and they expect to continue doing so for a long time, ANZ said.

The pep in house-price growth is perhaps the best indicator of the underlying health of the Australian economy, even when it is faced with lockdowns set to stretch on in Sydney from late June to as far as November, with state governments working overtime to ramp up vaccinations against Covid-19.

The outlook for housing will reinforce the cautious optimism about the economic prospect that still pervades the Reserve Bank of Australia, supporting the view that when lockdowns end, the economy will spring back to life, avoiding recession and setting up a strong expansion in 2022.

Confidence in the house-price outlook also reflects continuing confidence in the job market, with the central bank still expecting the economy to achieve full employment within a reasonably short time frame.

Prior to the return of lockdowns, unemployment had fallen back below 5%, well ahead of the RBA's expectations. Job vacancies, especially in states untouched by lockdowns, remain high.

The approach of full employment will open up a debate about wage growth and the timing of the first interest-rate increase, which the RBA continues to tell markets is a matter for 2024 and not earlier.

Key supports for the housing market include continuing fiscal stimulus to support incomes and employment, while households retain big savings buffers that can be deployed if job losses begin to mount, ANZ said.

Still, there is a risk to the outlook, with mortgage clamps likely to be tightened soon to stem the surge in house prices.

ANZ said it expects the Australian Prudential Regulation Authority to tighten mortgage-lending criteria for banks later this year, but it adds that the downturn in the economy through the second half of 2021 might force the regulator to back off until 2022.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

08-25-21 0307ET

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Financials
Sales 2021 17 363 M 13 015 M 13 015 M
Net income 2021 6 130 M 4 595 M 4 595 M
Net Debt 2021 - - -
P/E ratio 2021 13,7x
Yield 2021 4,94%
Capitalization 78 757 M 58 981 M 59 034 M
Capi. / Sales 2021 4,54x
Capi. / Sales 2022 4,35x
Nbr of Employees 37 844
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Number of Analysts 15
Last Close Price 28,24 AUD
Average target price 29,70 AUD
Spread / Average Target 5,17%
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Managers and Directors
Shayne Cary Elliott Chief Executive Officer & Executive Director
Farhan Faruqui Chief Financial Officer
Paul Dominic O'Sullivan Chairman
Gerard Florian Group Executive-Technology
Michael Liarakos Chief Compliance Officer