Australian banks

Banks rejoice: House prices to return to 2019 levels

PHOTO: Australian banks

After a bumper November for their share prices, the good news just keeps coming in spades for Australian banks to start December.

The real estate market, which the sector’s fortunes correlate with, has forgotten all about COVID-19 and is now absolutely buoyant.

In fact, 24 out of 28 finance experts forecast that house prices would exceed 2019 levels in the coming year, according to a survey by comparison site Finder.

LJ Hooker head of research Mathew Tiller said historic-low interest rates are sending the market into a frenzy.

“One of the main beneficiaries of the ongoing record low rates has been property markets, with LJ Hooker agents reporting a significant increase in enquiries and strong levels of sales transaction volumes.”

A resurgent economy will push banks higher

This, combined with a resurgent Australian economy, is set to fire a rocket under bank shares, according to Ausbil executive chair Paul Xiradis.

“As the economy builds strength, and companies complete their repositioning for a changed world and earnings growth returns, we believe one of the best risk-adjusted opportunities for leverage to a resurging economy is in the banks,” he said.

“Banks are still trading well below their long-term multiples, have experienced less delinquency and bad debts than first thought, and are all well capitalised.”