Earlier this week, ANZ Bank updated its forecasts for Australian house prices across the nation’s capital cities, now tipping they will fall by 8% by the end of 2022 and by 18% between now and the end of 2023:
ANZ tips major house price falls.
In particular, dwelling prices in Sydney are forecast to dive by 14% in 2022, and an additional 6% in 2023. Whereas prices in Melbourne are forecast to collapse 11% per cent in 2022 and 6% per cent in 2023.
You know Australia’s housing market is in trouble when even Domain’s CEO, Jason Pellegrino, is tipping a peak-to-trough fall in dwelling values of up to 15%:
“Prices have started to decline, listing activity has started to temper as well”…
“Agents, vendors and buyers are having to meet in the middle, having to have logical and rational discussions rather than a situation that we saw last year where there was a lack of supply and a really strong demand curve, particularly driven by FOMO (fear of missing out)”….
“We think the decline [in house prices] will be somewhere in the 10% to 15% range”.
Domain is notoriously bullish on property and generally publishes articles pumping-up the market.
Therefore, we should view its 10% to 15% forecast peak-to-trough price decline as conservative; although how deep it goes will depend upon how aggressively the Reserve Bank of Australia (RBA) hikes interest rates.
Futures market pricing implies ~7% mortgage rates.
For example, if the futures market’s latest forecast comes true, and the official cash rate lifts to 3.6% by April next year (implying a discount variable mortgage rate of 6.95%), then Australia would experience major house price falls – likely above 20%.
But if the RBA stops well short in its monetary tightening, then falls will obviously be lower.
The hammer is with the RBA. Pass the popcorn.
