Westpac Lowers Housing Price Forecast

Westpac Downgrades House Price forecast Amid Market Divergence

Westpac has revised its house price growth forecast downwards,now predicting 4% growth for the current year,a reduction from its previous expectation of 6%. This adjustment comes as the property market shows increased activity but muted price movements in the first half of the year.

The bank’s chief economist,Kelly Eckhold,noted that while housing market activity has improved and sits above average levels,the correlation between sales volume and price growth is diverging from typical patterns. “We’ve had about 1 percent house price growth in aggregate in the first half of the year,” Eckhold stated.

Eckhold attributed this divergence to an “unusually strong” supply response to increased demand. He explained that after a period where falling prices deterred sellers, a recent decline in interest rates has prompted a notable number of these “unrequited sellers” to list their properties.This influx of supply, occurring simultaneously with rising demand, has contributed to what Westpac describes as a “well-balanced market.”

Looking ahead, Westpac anticipates house prices to increase by 0.75% in the September quarter and a more ample 1.75% in the final quarter of the year, a period typically characterized by strong sales activity. For the following year,the bank forecasts a robust 6% growth in house prices.

Eckhold further advised that sellers with well-presented properties are likely to find buyers,citing a year-on-year increase in house sales of 16-17%,which is considered high on average. He emphasized that opportunities exist for both buyers and sellers, provided pricing is set appropriately, ensuring liquidity in the market.

How might the revised Westpac forecast impact first home buyers currently saving for a deposit?

Westpac Lowers Housing Price Forecast: What Home Buyers & Investors Need to Know

Revised Predictions & Market sentiment

Westpac, Australia’s oldest bank, has recently adjusted its housing price forecast, signaling a potential shift in the property market. As of July 25, 2025, the bank anticipates more moderate growth – or even declines in some capital cities – compared to earlier predictions. This revision comes amidst evolving economic conditions, including fluctuating interest rates, persistent inflation, and changing consumer confidence. The initial forecast, made earlier in the year, predicted stronger gains, but recent data has prompted a reassessment.

Key Changes to Westpac’s Forecast

here’s a breakdown of the key adjustments to Westpac’s outlook for major Australian cities:

sydney: Previously forecasting a 8-10% increase, Westpac now predicts growth of 5-7% for the remainder of 2025.

Melbourne: The forecast has been revised down from 5-7% to 2-4%.

Brisbane: A significant adjustment, moving from a 6-8% increase to a potential 0-2% rise.

Perth: Remains relatively stable, with a forecast of 4-6% growth, though slightly down from previous estimates.

Adelaide: Revised down from 3-5% to 1-3%.

Canberra: Expect a more subdued market with a revised forecast of -2% to 0%.

These changes reflect a growing concern about affordability and the impact of higher borrowing costs on first home buyers and existing mortgage holders.

Factors Driving the Downward Revision

Several factors have contributed to Westpac’s revised property market forecast:

1. Interest Rate Impact: The Reserve Bank of Australia’s (RBA) decisions regarding cash rate adjustments play a crucial role.Further rate hikes, or even the maintenance of current rates for an extended period, will continue to dampen demand.
2. Inflationary Pressures: While inflation is showing signs of easing, it remains above the RBA’s target range. This impacts household budgets and reduces disposable income available for housing.
3. Household Debt Levels: Australian households carry significant levels of debt. Higher interest rates exacerbate this burden, limiting borrowing capacity.
4. Supply & Demand Dynamics: Increased housing supply in some areas is beginning to offset demand, putting downward pressure on prices. New construction and apartment completions are contributing to this.
5. Consumer Sentiment: A decline in consumer confidence, driven by economic uncertainty, is impacting willingness to enter the property market.

implications for Home Buyers

the revised forecast presents both challenges and opportunities for prospective homeowners:

Increased Negotiation Power: With slower price growth, buyers may have more leverage to negotiate with sellers.

Extended Search Time: Don’t rush into a purchase. Take the time to find the right property at the right price.

Budgeting Carefully: Factor in potential further interest rate increases when assessing affordability.Use a mortgage calculator to model different scenarios.

First Home Buyer Grants & Schemes: Explore available government grants and schemes to help with deposit and purchase costs.

Consider Fixed vs. Variable Rates: Weigh the pros and cons of fixed versus variable home loan rates based on yoru risk tolerance and financial situation.

What this Means for Property Investors

Investors should also adjust their strategies considering Westpac’s updated forecast:

Rental Yields: Focus on properties with strong rental yields to mitigate the impact of slower capital growth.

Location, Location, Location: Prioritize properties in areas with strong long-term growth potential and robust rental demand.

Due Diligence: Conduct thorough due diligence on any potential investment, including property inspections and market research.

Diversification: Consider diversifying your investment portfolio to reduce risk.

Long-Term Perspective: Property investment is a long-term game. Don’t panic sell based on short-term market fluctuations.

Westpac’s Stance on Regional Markets

While capital cities are facing more moderate growth, Westpac suggests that some regional property markets may continue to perform well, particularly those benefiting from migration and infrastructure investment. However, it cautions against assuming all regional areas will experience the same level of growth. Careful research is essential.

Expert Commentary & Additional Resources

Economists at other major banks, such as ANZ and NAB, are also closely monitoring the situation.While their forecasts may differ slightly, there’s a general consensus that the rapid price growth seen in 2023 and early 2024 is unlikely to be sustained.

RBA Website: https://www.rba.gov.au/ – For the latest information on interest rates and economic policy.

Westpac Website: https://www.westpac.com.au/ – For Westpac’s official statements and research reports.

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