‘Downhill’: Major Aussie bank reveals grim new property price prediction as crisis worsens
One of the country’s biggest banks has made a major call on Australia’s property market – and it looks like nowhere is safe from the crash.
Homeowners have been dealt a huge new blow after a major lender revealed property prices are set to plummet even further than previously predicted.
According to the ANZ’s latest housing report, property prices are set to fall by almost 20 per cent by the end of 2023 – and the crash is not limited to our major cities.
Driving the bleak trend is a “steep increase in mortgage rates between May and the end of this year” coupled with reduced borrowing capacity, with capital city prices tipped to drop by 18 per cent before climbing by 5 per cent in late 2024.
If ANZ’s grim property price forecasts come to pass, new analysis from RateCity.com.au has revealed the median house price in Sydney could plummet by a further $204,543 compared to now, while in Melbourne, the median house price could fall by $128,141 compared to now, and by more than $160,000 in Brisbane and Adelaide by the end of next year.
ANZ senior economists Felicity Emmett and Adelaide Timbrell explained that there would be a significant cutback in maximum home loan sizes, with banks anxiously examining whether borrowers will be able to manage their repayments in light of Australia’s skyrocketing interest rates.
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“Our forecast for the cash rate to reach 3.35 per cent equates to a reduction in borrowing capacity of nearly 30 per cent,” they wrote.
“This reduced ability to pay up will drive prices lower over coming months.
“Already housing finance data show that average new mortgage sizes are beginning to fall.”
They noted that while low unemployment, increasing immigration rates and the nation’s stretched rental market would help lessen the house price fall, the market wouldn’t pick up again until rates fell.
“In 2024, we expect to see the beginnings of a recovery in house prices, alongside cuts in the cash rate in the second half,” they wrote.
While the most significant price falls will be seen in our two biggest cities, Sydney and Melbourne, the report noted the trend would occur nationally, including in regional areas and across all capital cities next year.
Meanwhile, the ANZ predicts that construction activity will also decline by 16 per cent over 2023-24, with approvals set to fall through 2022 and into 2023 as “higher mortgage rates constrain lending”.
However, the economists claimed that “renovation activity and the backlog (of already-approved projects) will keep construction activity solid”.
ANZ’s 18 per cent house price fall prediction is even worse than last month’s PropTrack Property Market Outlook report, which claimed prices could plunge by as much as five per cent in the next five months and are expected to be down by 15 per cent by the end of next year.
The report found that house and unit values will fall between two and five per cent nationally for the rest of the year.
But next year the results were even more extreme, with values forecast to plunge between seven and 10 per cent in 2023, with the report’s author noting that would “potentially bring prices down 15 per cent from current levels”.
Sydney and Melbourne prices are set to fall the furthest by the end of next year.
PropTrack Director of Economic Research and report author Cameron Kusher said the unwelcome outlook was the result of a string of factors.
“The recent run-up in prices, coupled with reducing borrowing capacities as interest rates rise, is likely to see price falls broaden and then accelerate further into 2023, with the more expensive cities expected to record the largest price falls,” Mr Kusher said.
“Nationally, we are forecasting prices to fall by between two and five per cent by the end of this year and by a further seven to 10 per cent by the end of next year.”
– with Alex Turner-Cohen
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