In their weekly newsletter, Westpac has revealed their predictions for the residential property market over the coming years, stating that the bank expects ‘mild dwelling price correction through to late 2021’ to be followed by a 15% increase over the following two years.

Westpac’s initial estimate was a drop of 10% from price peaks, which has now been revised to a 5% national drop. Westpac cites two factors that have resulted in their revision. The first is that the economy will receive a significant boost from low interest rates, especially low fixed rate mortgages. The second factor is that the recession has been milder than they expected.

Westpac predicts that the market will go through four stages over the next few years leading up to that 15% price surge.

The first stage is price falls in response to the initial COVID shock – which is mostly behind us.

The second stage is relatively stable prices through to March next year as economic stimulus and loan deferrals remain in place.

The third stage is minor softening of prices in the second half of 2021 as lenders begin to wind back loan deferrals. Much of the impact will be eased by ‘ultra-easy’ monetary and fiscal policy and regulatory support.

The fourth phase will last for two years, and will begin once the distressed loans have worked through the system and been resolved. Prices will react favourably to ongoing low rates, policy stimulus, and economic recovery. During this phase, national dwelling prices will grow by 15%.

It’s great to see some of the big shots out there are being man enough to own up to the fact that things did not end up nearly as bad as they wanted you to believe it would.