Prices to continue falling well into next year, experts predict
Property prices will continue plummeting well into 2023 as market sentiment falls, according to National Australia Bank’s latest survey.
Forecasters said that the value of a median Sydney house could fall by another $175,000 by the end of next year if negative market sentiment continues, The Australian reported.
NAB found that housing market sentiment fell for the second consecutive quarter in the three months to the end of September, inching below the survey average for the first time in two years. Sentiment dropped the most in ACT, and fell in all states except Western Australia. Both Victoria and New South Wales saw sentiment slide into the negative for the first time since the beginning of the COVID-19 pandemic.
“Our outlook for property prices is broadly unchanged, with dwelling prices expected to decline by around 20% across the capital cities from the peak in mid-2022,” NAB chief economist Alan Oster told The Australian. “The declines are expected to be broad-based, but led by areas where affordability constraints are most binding. To date, Sydney and Melbourne have led the declines, but prices in other capital cities now appear to have also peaked – and the decline in Brisbane has accelerated.”
On Tuesday, the Reserve Bank hiked the cash rate by 25 basis points to 2.6% – only half the predicted 50-basis-point hike.
“We expect the RBA to lift rates further in the coming months, taking the cash rate to 3.1% before pausing to assess the impact of rate increases to date,” Oster told The Australian. “While the influence of global factors on inflation is expected to wane, domestic factors will become increasingly important – including faster wage growth.”
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A RateCity analysis of NAB’s sentiment data found that the median Sydney house price would be $1.1 million by the end of 2023 if the bank’s forecasts are accurate. The current median price is $1.28 million. There would be a 17% drop in Melbourne, with values falling $156,000 to $780,000.
“While some buyers’ budgets are shrinking, other buyers are tapping out altogether in the hope of finding a cheaper deal down the track,” RateCity research director Sally Tindall said. “In the boom, a ‘fear of missing out’ drove property prices higher. Now a ‘fear of getting in’ is having the reverse effect.”
Tindall told The Australian that falling property prices were typically a good thing for first-home buyers.
“However, with interest rates still on the rise, it’s not going to be a walk in the park,” she said. “They’ll be paying more in interest for the money they borrow against what is an uncertain backdrop. Borrowers who can’t refinance their loan because of their equity position should still negotiate with their lender for a better rate. This will help them make their monthly repayments, and potentially extra so they can break out of mortgage prison faster.”
