Growing property optimism among big banks

Recent media reporting indicates ANZ and CBA have both revised their more severe outlooks of the Australian property market, joining NAB in expressing a greater level of confidence for the end of 2020 and into 2021. Although NAB forecast Brisbane to lead the post-COVID upswing, ANZ are placing their bets on Perth leading the 2021 charge with a 12 percent jump over the year. CBA aren’t as optimistic as the others but have recently reported on the continued recovery of the housing market.

This news follows a series of concerns expressed by equity market commentators that the current price of shares is not supported by the earnings of their underlying companies. This means that either shareholders are extremely confident in the future prospects of these companies, or that the shares are artificially overvalued. This has led some to suggest a prolonged stagnation in the share market, which may very well redirect investment to alternative assets such as real estate.

The ANZ-Property Council of Australia ‘property sentiment index’ has been climbing since it bottomed out in Q2 2020, but is still below the pre-COVID level. This suggests that COVID hasn’t entirely disappeared from the market psyche, but lending figures would suggest otherwise. As reported via the research blog a few weeks ago, the monthly volume of owner occupier loans has never been higher and investor loans have been on a continuing upward trajectory for several months. This upturn is likely to continue unabated if share market investors take a view that the market’s PE ratio is unjustifiable and instead opt to invest in property. Since the APRA regulations on growth in investment finance are no longer in place, it’s likely that lenders will be in the position of balancing profit with responsible lending.

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