The uptrend in mortgage rates is expected to be a major driver of the likely 10% decline in national property prices this year.
According to PropTrack’s Property Market Outlook, national property prices are projected to continue to downtrend, falling between 7% and 10% overall this year.
The expected decline this year will extend the 2.3% drop recorded in 2022.
The forecast assumes that the cash rate will rise 50bps further this year to hit 3.60% and remain on that level for the rest of the year.
PropTrack director of economic research Cameron Kusher said interest rates have risen faster than expected, as property prices ang sales activity declined.
“With borrowing costs continuing to rise and the subsequent reduction in borrowing capacities, property price falls are likely to continue and accelerate in 2023, with the more expensive cities likely to see the largest price falls,” he said.
Based on forecast, Sydney, Brisbane, and Canberra are likely to record the biggest declines in property prices, ranging from 8% to 11%.
Melbourne and Hobart are also likely to see declines of around 7% to 10%.
Mr Kusher said property prices are already 4.3% down from the peak achieved at the height of the pandemic.
“A fall of up to 10% this year would result in cumulative declines of close to 15% since the start of the downturn,” he said.
“Importantly, this fall would represent a decline of around half that of the decline in borrowing capacities and would still have national home prices sitting above their pre-pandemic levels.”
In fact, national property prices will still be more than 18% above the pre-pandemic levels despite the likely declines.
“The strong labour market, with unemployment the lowest it has been in decades and wage growth accelerating, may also support the housing market.”
Here are some of the other findings of the PropTrack report:
- Sales volumes were down 16.5% throughout 2022 compared to the previous year. Despite the decline, sales activity was still 16.9% higher than 2019.
- Based on data from realestate.com.au, listings were higher 6.3% compared to last year.
- New supply coming into the market has trended lower since its peak in March 2022 — by December 2022, new listings were down 24.8% from last year.
- The number of enquiries declined 34.6%, indicating less urgency among buyers to purchase.
- The median number of days a property was listed was 42, up 10 days from the record low achieved in December 2021.
Photo by Stephen Leonardi on Unsplash
