House prices to tumble up to 5% nationally by Christmas



Property prices are set to fall up to 5% nationally by the end of the year as rising interest rates weigh on buyers.

In 2023, prices are expected to fall further, between -7% and -10%, potentially bringing prices down by a total of 15% from current levels, a new study has revealed.

The data was analysed by the REA Group in its PropTrack Property Market Outlook July 2022 Report, which combines a comprehensive analysis of the residential property market with an outlook for the year ahead.

The report found Sydney and Melbourne are set to lead the price falls with prices declining between -3% and -6% this year and -9% to -12% in 2023.

Meanwhile, Adelaide and Perth are tipped to record between 2% and 5% growth by the end of the year, with Perth expected to enjoy further price growth in 2023.

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PropTrack director of economic research and report author Cameron Kusher (pictured) said Australia’s housing market had changed significantly over the past six months.

“While there were already some signs that the rate of price growth was slowing at the beginning of this year, we were not expecting interest rates to rise until early 2023,” Kusher said. “There’s since been an outbreak of inflation, resulting in the RBA lifting rates in each of the three months to July 2022. This has taken the cash rate from 0.1% to 1.35% and further rate increases are anticipated.”

Kusher said he expected the cash rate to rise between 2.5% to 3% by the end of this year, with some further increases in early 2023.

“Thereafter, we expect rates to remain on hold with the potential for them to be reduced in late 2023 or early 2024,” he said.

Kusher said although price growth was already slowing before the rate hikes, the RBA’s moves had further slowed price growth and resulted in some falls over recent months.

“National property prices have fallen by -0.5% from their peak in March 2022 and prices have already slipped lower than their recent peaks in Sydney (-1.5%), Melbourne (-1.8%), Brisbane (-0.1%), Darwin (-0.6%) and Canberra (-0.5%), while the rate of growth continues to slow elsewhere,” he said.

“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.”

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Kusher said demand for regional properties was also likely to slow given prices had seen stronger growth in these areas than within the capital cities. 

“Despite home prices growing at an exceptional pace over the last two years, rising 34% since the pandemic onset in February 2020, even with a -15% fall by the end of next year, home prices will still be well above pre-pandemic levels,” he said.

Kusher said the 6.1% inflation rate announced on Wednesday was a large increase, it was not as high as many were anticipating.

“It is still the greatest YOY in inflation since June 2001 following the introduction of GST, however YOY inflation was also 6.1% in September 2000, but before those two periods you’d have to go all the way back to December 1990 to see a higher read (6.9%),” he said. “Core inflation rose to 4.9%, which was well outside of the RBA’s target range and all but confirming another interest rate hike in August. With interest rates set to rise further, property prices will continue to slow.”