Property prices are set to fall between 7 per cent and 10 per cent nationally by the end of 2023 following a 2.3 per cent decline in 2022, according to PropTrack’s Property Outlook Report.
The report revealed that the greatest declines are set to affect Sydney (8–11 per cent), Melbourne (7–10 per cent), Brisbane (8–11 per cent), Hobart (7–10 per cent), and Canberra (8–11 per cent).
Meanwhile, Adelaide (3–6 per cent), Perth (5–8 per cent), and Darwin (3–6 per cent) will see less of a change.
PropTrack director of economic research, Cameron Kusher, said: “As interest rates have risen faster and higher than expected, property prices have fallen, along with sales volumes.”
While PropTrack does not expect interest rates will rise as fast and high as they did in 2022, the firm had pencilled in two rate hikes for early 2023, the first of which was delivered by the Reserve Bank of Australia (RBA) on Tuesday.
“With the RBA’s hike of 25 basis points today, we’re expecting an additional rate rise of 25 basis points, or thereabouts, likely to follow next month,” Mr Kusher said immediately following the decision.
“Thereafter, we expect rates to remain on hold, with the potential for them to be reduced in late 2023 or early 2024.”
If interest rates are hiked a further 50 basis points, borrowing capacities would be down by around 30 per cent.
However, an interest rate cut late in 2023 could be in the cards depending on how the economy performs, according to Mr Kusher.
Similarly indicated by CoreLogic’s projections for 2023, he said that property price falls are likely to continue and accelerate this year alongside borrowing costs rising.
“Demand for regional properties is also likely to slow and, given prices have seen stronger growth in these areas than within the capital cities, we expect to see price falls in these markets too,” Mr Kusher added.
Last year’s changing market saw prices fall 2.3 per cent following exceptional price growth throughout the pandemic. With prices down 4.3 per cent from their peak (March 2022), a fall of 10 per cent this year would result in cumulative declines of close to 15 per cent since the start of the downturn.
“Importantly, this fall would represent a decline of around half that of the decline in borrowing capacities and would still have national home prices sitting above their pre-pandemic levels,” Mr Kusher explained.
Namely, national property prices will still be more than 18 per cent above pre-pandemic levels in the event of a 10 per cent fall.
Concluding on the report’s findings, Mr Kusher added: “The strong labour market, with unemployment the lowest it has been in decades and wage growth accelerating, may also support the housing market.”
