HSBC has warned Australian house prices could fall as much as 12% in 2021 as the fallout from the COVID-19 pandemic continues.
HSBC analysis showed Sydney house prices could fall by as much as 15% next year, while Melbourne could see a 17% drop.
HSBC chief economist Paul Bloxham said a U-shaped recovery and COVID-19-related policies are likely to take their toll on the property market.
However, it was noted that the gains accumulated before the pandemic will offset the decline in prices expected in the second half.
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Nationally, prices could end 6% higher, with Sydney up as much as 9% and Melbourne as much as 7% higher.
Bloxham said stalled migration and rising unemployment were likely to drive an oversupply in housing.
"Forecasting housing prices is difficult at the best of times, but at the moment it is particularly challenging," HSBC said.
"Although interest rates are at record lows, which should support housing prices, at the same time, the COVID-19 economic shock, stalled migration and rising unemployment are set to weigh on housing demand."
Bloxham said low interest rates would work to make the housing market attractive to borrowers.
This comes after Commonwealth Bank suggested house prices could fall as much as 32% with the bank reserving $1.5 billion to offset the impacts of COVID-19.
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