The voter-wary federal government sees housing as an asset class too big to fall and will likely extend the JobKeeper supplement again next year to shore up the market, leading to price gains of up to 9 per cent in 2021, says property research company SQM Research.
The most likely scenario next year is that the government extends JobKeeper for another six months to September to prevent distressed sales by owners, leading to gains of up to 12 per cent in Perth, 11 per cent in Sydney and 10 per cent in Adelaide, SQM says.
But the outlook from SQM – one of Australia's more accurate forecasters – that also hinges on successful containment of further COVID-19 outbreaks as they occur and the progressive rollout of a vaccine, carries much larger risks for the country.
The reluctance by both mainstream political parties to let housing behave like a healthy market and fall, resetting the market, will exacerbate Australia's housing affordability problem and the gap between home ownership haves and have-nots will widen, SQM says.
"They will never let a housing crash happen in this country," managing director Louis Christopher told The Australian Financial Review.
"The path they've put us on ... will mean home ownership rates are going to keep falling over the next 10, 15, 20 years. That's bad news for liberal democracy. We don't have a crash but instead have a massive gap between those who have a house and those that don't."
Ownership, a postwar aspiration of middle-class Australia and a key means of wealth accumulation in this country, is already falling. Outright ownership and ownership with a mortgage slipped to 65.5 per cent in the 2016 census from 67 per cent five years earlier.
They look at housing in part as 'the economy' or a significant contributor to the economy ... I don't think it's the right way of viewing the world.
— Louis Christopher, SQM managing director
The dilemma for political leaders is that while a sharp housing correction would open up home ownership more widely, particularly to younger and first-time buyers, it could arouse hostility among the wider pool of existing owners for whom the home is their largest asset.
Citing Reserve Bank of Australia findings last month that JobKeeper had saved an estimated 700,000 jobs, SQM said that to end the payment in March as planned would weaken housing in most cities, except Perth and Canberra, where a price gain of up to 9 per cent is forecast.
This scenario, the most severe in Christopher’s Housing Boom and Bust Report 2021, slashes the prospects for housing price growth in Melbourne, from a 2-6 per cent increase under an extension of JobKeeper to a fall of up to 5 per cent, even with the same level of stimulus coming from RBA quantitative easing and the same low rates.
"We think a premature scaling back ... would hurt Sydney and Melbourne the most, but there could be negative impacts elsewhere," the report says.
"But we don't think the government will scale back such schemes if it is too premature, hence why this is not our base-case scenario."
A better than expected rollout of a vaccine in the first half of 2021 that could sharply lift sentiment and trigger the central bank to end quantitative easing by the December quarter could trigger stronger housing price growth in the resource-dependent capitals of Perth (up to 15 per cent) and Brisbane (up to 9 per cent compared with a base case 8 per cent gain).
But even if this happened and JobKeeper did end in March, housing price growth in other cities would weaken from the base case, SQM said.
Under SQM's fourth scenario, in which no effective vaccine was found and the economy was beset by ongoing waves of the virus that closed state borders and triggered rolling localised shutdowns, the country's property markets would still be buoyed by an extension of the JobKeeper and JobSeeker programs until the year end.
The political importance of housing prices still made an extension of JobKeeper likely, Mr Christopher said.
"I do think they look at housing in part as 'the economy' or a significant contributor to the economy, both in terms of housing prices and the jobs creation surrounding housing construction," he said.
"I don't think it's the right way of viewing the world."