Grim prediction Australia facing major housing crash

A global bank has warned that Australia’s housing market is set for a much bigger crash than elsewhere in the world as fears of a global recession mount.

A global bank has warned that Australia’s housing market is set for a much bigger crash than elsewhere in the world as fears of a global recession mount.

Unlike the latest global recession of 2008, Australia’s real estate sector is expected to take a larger hit, while the US will emerge largely unscathed.

That’s according to the latest report released by Goldman Sachs earlier this month, called ‘The housing downturn: A bigger deal down under and up north’.

The bank’s research concluded that a large crash will drastically drag down house and unit prices between now and the end of next year.

Australian properties will plunge by a whopping 18 per cent after the bubble bursts, if the report is right.

New Zealand came out worst in the report, with its property values to plummet by 21 per cent. Canada was also named and shamed after forecasts of a 13 per cent plunge.

It comes as property data already indicates the sector is on the decline in Australia after five consecutive months of interest rate hikes by the central bank.

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Property will plunge by 18 per cent, according to the latest modelling. Picture: Newscorp- Daily Telegraph / Gaye Gerard

According to the report, other G10 countries will suffer a much smaller drop in house prices.

Over in France, the nation’s property average will dip by just six per cent by the end of 2023.

It was even better in the UK, which is expected to largely remain stable.

Meanwhile, in the US, properties are actually going to go up slightly, by 1.8 per cent.

“Across the G10, home sales are falling quickly and home price growth is slowing, with outright price declines in places that saw the bigger increases during the pandemic,” write Goldman Sachs researchers.

Indeed, in 2021, the Australian property market was turbocharged, with house prices rising nationally by 25 per cent in a year.

At its peak, the cumulative value of all of Australia’s property surpassed $9 trillion.

The US and UK, in comparison, never experienced as big of a boom, and so accordingly won’t topple by as much either.

Property markets are set for a big fall, according to a Goldman Sachs report. Picture: Gaye Gerard

Goldman Sachs’ predictions are largely in line with what Australian banks have forecast for the coming year.

At the end of last month, Westpac warned Aussies about an 18 per cent in Melbourne and Sydney by the end of next year.

However, the rest of the country was a much more sedate drop, of around eight per cent on average.

The week before, ANZ also released a similar forecast, with capital city prices tipped to drop by 18 per cent for the end of next year before climbing by five per cent in late 2024.

As cost of living pressures bite and interest rates rise, there are already early signs that the property sector is caught up in a market slowdown.

According to PropTrack’s latest Home Price Index released at the beginning of this month, Australian house prices have fallen by 2.7 per cent nationally since their peak last year and any rises from early 2022 have all but disappeared.

In August, houses prices across Australia fell by 0.39 per cent but regional areas have been hardest hit by rising interest rates with prices plunging at their fastest pace since 2011.

Sydney prices continued to drop by 0.49 per cent, but have experienced a dramatic drop in particular in the past six months.

In fact, Sydney’s home prices in August last year were higher than they currently are now.

Originally published as Grim prediction Australia facing major housing crash