Invest
Westpac predicts house prices will fall for the next 2 years
Prices are expected to fall by 14 per cent over two-and-a-half years.
Westpac predicts house prices will fall for the next 2 years
The growth of Australia’s property market is expected to flatten within months before prices start to fall later this year, according to updated forecasts from Westpac.
The bank has brought forward its forecast for prices to flatten by May 2022 rather than in the second half of the year ahead of a decline during the December quarter in response to anticipated rate rises in August and October.
Prices are then expected to drop by 7 per cent in 2023 and a further 5 per cent in 2024, resulting in a total fall of 14 per cent over a two-and-a-half-year period.
“In level terms, this means prices at the end of 2024 will be on a par with their level in April last year,” said Westpac chief economist Bill Evans and senior economist Matthew Hassan.
“The peak to trough decline is comparable to most previous price corrections over the last 40 years when measured in real, inflation-adjusted terms, but milder than the Sydney and Melbourne price corrections in 2017-18.”
The Westpac economists said that housing would be collateral damage in the RBA’s efforts to keep inflation within its target range over the medium term.
“The sector is highly sensitive to interest rate changes. With affordability already stretched in many markets, rate rises will have a direct impact on the borrowing capacity of buyers and their ability and willingness to sustain high prices,” they said.
“The extraordinary surge in prices over the last year has seen affordability deteriorate to be near previous lows in 2010 and 2007 – both of these earlier benchmarks were at times when the average discounted variable mortgage rate was materially higher than it is now.”
Westpac’s forecasts suggest national house prices will rise 2 per cent in 2022, including rises of 8 per cent in Brisbane and Adelaide and 2 per cent in Perth.
Meanwhile, Sydney, Melbourne and Hobart are all expected to end the year flat.
“Prices in markets facing more stretched affordability will be more sensitive to interest rate rises,” Westpac said.
“Sydney, Melbourne and Hobart are expected to see earlier and more pronounced price corrections. Brisbane and Adelaide are expected to see a milder price cycle.”
Sydney and Melbourne will have the largest falls during both 2023 and 2024, according to the bank’s forecasts, with drops of 9 per cent for both cities in 2023, followed by a 5 per cent fall for Sydney and 6 per cent for Melbourne in 2024.
In comparison, Westpac expects house prices in Perth and Hobart will drop 6 per cent during 2023, while prices in Brisbane and Adelaide will drop by 4 per cent.
The decline in these capital cities is then expected to ease throughout 2024, with Brisbane, Perth and Adelaide ending the year down 1 per cent and Hobart down 2 per cent.
“By the end of 2024 the mix of lower prices and higher incomes will have more than offset the effect of higher rates restoring affordability to more normal levels for most markets,” said Mr Evans and Mr Hassan.
“However, with the RBA successfully achieving its target of sustainable inflation within the target zone without needing to adopt a sharply contractionary stance prospects for a near term rate cut cycle will be remote and housing markets will need to adjust to the prospect that, in the absence of some major shock like COVID or the GFC, rates are unlikely to ease in the foreseeable future.”
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
