Major bank NAB has upgraded its house price growth expectations for the Melbourne market, predicting a 17.6 per cent rise in 2021.
The revised outlook, released Monday, cited low interest rates and a "stronger than expected" recovery in the labour market as key reasons for the uplift.
Melbourne's growth rate is just below the 18.5 per cent predicted nationally, with Sydney, Brisbane and Hobart all expected to outpace the city this year.
At the same time the bank has revised its forecast for 2022 down, reasoning that affordability constraints would likely start to emerge.
Melbourne is expected to record a 3.5 per cent increase in house prices to the end next year, according to the bank.
NAB's predictions are far higher than those of property professionals who participated in its latest residential property survey.
The Victorian professionals surveyed by the bank predicted a 3.9 per cent increase in prices over the next year and a 3.5 per cent increase over the next two years.
"Despite recent data pointing to a continuation of strong house price growth across the country, the average survey expectation for future growth moderated," the report said.
Woodards Carnegie director Ruth Roberts said that the NAB figures were far higher than she had anticipated.
"I was surprised, as I feel as though the market has probably settled [although] we have achieved, and are still seeing some great results. While there are good numbers out there and houses are still selling particularly well my sense is that the market overall has settled, having said that it is still tough to buy and good properties will have plenty of competition." she said.
This had become particularly apparent over the past month and could be due to buyers starting to reach the top of their repayment capacity.
"I think that's probably got something to do with it - maybe it [prices] just got too high," she said.
Lockdown didn't stop growth
NAB said that despite being slightly lower in May, growth in the month of June had continued "within the range of growth it has been since February".
This was also the case in Melbourne, which was subject to lockdown restrictions during part of that period.
This suggests that "short-lived lockdowns are unlikely to significantly slow the market," according to the bank.
Ms Roberts said that, if anything, lockdowns had increased activity levels in the Carnegie area.
"I believe it drives prices. People get a little unsettled not being able to get out and do what they like doing, and they like looking at real estate," she said.
Victoria's FHB incentives most effective
The latest release of the survey also asked participants to rate the effectiveness of their state's government incentives on increasing first-home buyer activity.
Victoria's incentives were judged the most effective, scoring 7.6 on a scale of 10, while Tasmania's were the least, rating 5.8.