Cities where house prices are expected to fall by the tens of thousands by the end of the year
Property prices across the country are expected to fall by another 5 percent before the year ends, a new report estimates.
A mid-year report by market analyst PropTrack predicts average property prices nationwide will fall between 2 percent and 5 percent by the end of December.
By the end of next year, they are expected to fall even further, potentially by as much as another 10 percent.
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Cameron Kusher, director of economic research and author of the PropTrack report, said the research highlights a rapidly changing housing market.
“While there are already signs that the pace of price growth slowed earlier this year, we do not expect interest rates to rise until early 2023,” he said.
“Since the inflation outbreak, which resulted in the Reserve Bank (RBA) raising interest rates in each of the three months through July 2022.”
The cash rate is currently 1.35 percent but is expected to be raised for a fourth straight month when the board meets on Tuesday.
That follows the release of the latest consumer price index figures, which show Australia’s inflation rate has risen to 6.1 percent.
PropTrack research operates on the assumption that the cash rate will rise to between 2.5 percent and 3 percent by the end of 2022.
They will then be subject to further increases in early 2023 before remaining on hold, with the potential to be reduced by the end of the year or early 2024.
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“Recent price increases, coupled with reduced borrowing capacity due to rising interest rates, are likely to see prices fall more broadly and then accelerate further into 2023, with more expensive cities expected to post the biggest price declines,” said Kusher.
The report predicts that the most expensive cities, Sydney and Melbourne, will lead the price declines.
They will decline between 3 percent and 6 percent this year and 9 percent and 12 percent in 2023.
According to PropTrack, the median house and unit prices in Sydney are $1,435,000 and $780,000, respectively, meaning a worst-case scenario would subtract $86,100 from house prices and $46,800 from unit prices before the year ends.
Prices in Hobart are expected to fall between 1 percent and 4 percent this year and 7 percent and 10 percent next year.
Darwin is projected to fall between 0 percent and 3 percent this year and between 4 percent and 7 percent next year.
Canberra is projected to decline between 3 percent and 6 percent this year and 7 percent and 10 percent next year.
The only capital cities that are expected to show price growth for the rest of the year are Adelaide and Perth.
Property prices in both cities are expected to increase between 2 percent and 5 percent.
Brisbane prices could also increase, with a projected growth of between 2 percent and a decline of 1 percent.
However, the reports are not all good news for potential buyers.
Even if there is a 15 percent drop in property prices by the end of next year, house prices will still be well above pre-pandemic levels.
“Although, house prices have grown at an incredible pace over the past two years, up 34 percent since the start of the pandemic in February 2020.”
Economists predict another rate hike when the RBA board meets on Tuesday following the release of Australia’s inflation rate, which jumped to 6.1 percent.
Treasurer Dr Jim Chalmers said the figures were “not news” to many Australians.
But he expects more interest rates to follow.
“They have flagged themselves, the Governor of the Reserve Bank said that there are more rate hikes to come and people need to be prepared for that,” he said.
“I am not ready to nominate a number. The Treasury, when they make forecasts, they make assumptions about what the market expects and it’s not really me doing that.
“But interest rates will rise further, and that will make life more difficult for people who are already dealing with these skyrocketing costs of living.”
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