The Commonwealth Bank, Australia’s largest mortgage lender, has announced when house prices will begin rising again following interest rate hikes… and it’s sooner than you would think.
Commonwealth Bank anticipates a 15 percent property market decrease.
The median price of a home in a capital city is anticipated to fall by $141,038 to $799,220.
The largest Australian mortgage lender predicts the worst will be gone by June 2023.
Gareth Aird predicted a recovery in late 2023 due to Reserve Bank rate cuts.
The Commonwealth Bank now expects the recovery of Australia’s housing market to begin in the middle of next year, after prices plunged by 15% and by about $150,000.
The bank’s head of Australian economics, Gareth Aird, anticipated that housing values would reach their worst in the middle of 2023, before gradually recovering in the second half of the year.
He stated, “We maintain our central scenario that national home values will decline 15% from peak to trough, although this prediction is now anticipated to be realized sooner.”
The Commonwealth Bank, Australia’s largest mortgage lender, predicted in June that the worst of the downturn will be over by the end of 2023.
However, it now anticipates a 15 percent decline from the top in April 2022 to the trough in June 2023, with rate cuts by the Reserve Bank projected to trigger a housing market recovery as inflation pressures ease in the coming year.
If this estimate comes true, the median price of a home in Australia’s capital city will have fallen by $141,038 to $799,215 from $952,255 just four months ago, when interest rates increased.
After a 15% decline, the Commonwealth Bank now expects the Australian housing market to recover by the middle of next year.
The Commonwealth Bank anticipates an 8% decline in capital city home prices in 2022 and a 3% decline in 2023, with prices falling in the first half of the year before rising in July.
Using CoreLogic’s December 2021 median combined capital city house price of $890,469 as a benchmark, this would result in a $71,238 decrease this year and a $24,577 fall next year.
Commonwealth Bank predictions for new home prices
SYDNEY: Down 14% in 2022; flat in 2023 as part of an 18% peak-to-trough decline or a drop of $255,053
12 percent decrease in 2022; 2 percent decrease in 2023; 17 percent reduction from peak to trough; $170,157.
BRISBANE: Down 2% in 2022; down 6% in 2023 as part of a 17% peak-to-trough loss or $149,655 decrease
ADELAIDE: Up 8% in 2022; down 7% in 2023 for an 11% peak-to-trough loss or a $74,420 decrease.
PERTH: Up 2% in 2022; down 5% in 2023 for an 8% peak-to-trough loss or a $46,300 decrease.
HOBART: Down 5% in 2022; down 8% in 2023 as part of a 16% peak-to-trough fall or $126,996 decline.
DARWIN: flat in 2022; down 7% in 2023 as part of a peak-to-trough decrease of 12% or $69,138.
CANBERRA: Down 4% in 2022; down 8% in 2023 as part of a drop of 16% from peak to trough, or $171,235.
According to Commonwealth Bank projections, national housing prices will peak in April 2022. Using December 2021 CoreLogic median house price data as the benchmark, annual decreases are calculated.
By the end of the following year, urban home prices are projected to have increased by tens of thousands of dollars compared to mid-2023.
Prior to the end of the era of record-low Reserve Bank cash rates in May, house prices reached an all-time high in April as a result of the sharpest interest rate increases in nearly three decades.
The maxima occurred in separate months of 2022, with Sydney and Melbourne reversing direction quicker due to greater sensitivity of borrowers to interest rate increases.
The Commonwealth Bank anticipates a cash rate high of 2.6% by November, based on a 0.5% RBA rate increase in September and a 0.25 percentage point increase on Melbourne Cup day.
This is far less than ANZ’s prediction of a 10-year high cash rate by November, up from the current six-year high of 1.85%.
Mr. Aird noted that the CBA’s prediction that the cash rate will peak at 2.6% is one of the most conservative among the forecasting community.
The Commonwealth Bank anticipates that the Reserve Bank of Australia will begin decreasing interest rates again in the second half of 2023, which will stimulate a real estate revival.
Mr. Aird stated, “We expect the inflationary momentum to moderate next year, allowing the RBA to loosen monetary policy in support of the economy.”
Rate increases of 1.75 percentage points in May, June, July, and August were the biggest since 1994, bringing the cash rate to a six-year high of 1.85%.
The Reserve Bank of Australia and the Australian Treasury anticipate that inflation will reach a 32-year high of 7.75% by the end of this year, before easing gradually.
The Commonwealth Bank is now optimistic that inflation will return to the upper end of the RBA’s 2 to 3 percent target range by the end of next year, allowing it to ease monetary policy.
Sydney
As part of a peak-to-trough reduction of 18%, it was predicted that Sydney property values will decline by 14% in 2022, but remain unchanged in 2023.
In April, the median home price was $1,416,960, thus a decline of 18 percent would result in a decrease of $255,053 to $1,161,907 by mid-2023.
Sydney home prices were projected to shrink by 14% in 2022, but remain unchanged in 2023, as part of an overall peak-to-trough decline of 18% or $255,053 (pictured is the harbour from the lower north shore)
Based on a calendar year reduction, a 14 percent decline in 2022 would result in a $192,496 decrease in the median home price from December 2021’s $1,374,970 to $1,182,474 in 2022.
On the basis of declines in the first half of 2023, a flat result was anticipated for the following year, followed by a rebound in the second half.
Melbourne
Melbourne was anticipated to see a peak-to-trough decline of 17%, which would result in a median house price decline of $170,157 to $830,769 by the middle of the following year, from $1,009,336 in April 2022.
The capital of Victoria was anticipated to have a 12 percent decline in 2022, resulting in a $199,751 decline to $878,177 from the December 2021 high of $997,928.
A predicted 2% decline in 2023 would result in a median price of $860,613 by the end of the year.
Brisbane
Brisbane was forecast to have a peak-to-trough reduction of 17%, which would result in a $149,655 decline from $88337 in April to $730,667.
The Commonwealth Bank anticipated a 2% fall in 2022, or a $15,659 decline from December 2021’s price of $782,967, followed by a 6% decline in 2023, which would bring prices to $721,269 by the end of 2023.
The Queensland capital was anticipated to continue to decline in 2023, while Sydney and Melbourne had lower declines.
The median house price in Melbourne was anticipated to decrease by $170,157, or 17%, from $1,00926 in April 2022 to $830,769 in the middle of the following year.
Adelaide
Adelaide was forecast to see a peak-to-trough decline of 11%, resulting in a $74,420 decline from $676,560 in April 2022 to $602,126 by the middle of 2023.
What the major banks are expecting RIGHT NOW
WESTPAC: cash rate of 3.35 percent by February 2023
This would entail increments of 50 basis points in August and September, as well as increases of 25 basis points in October, November, December, and February.
ANZ: cash rate of 3.35 percent by November 2022
This would encompass rises of 50 basis points in August, September, October, and November.
COMMONWEALTH BANK: Cash rate of 2.6% by November
This would entail rate increases of 50 basis points in August and September and 25 basis points in November.
2.85% cash rate by November from NAB
This would involve increases of 50 basis points in August and September and increases of 25 basis points in October and November.
The capital of South Australia was anticipated to expand by 8% this year, resulting in a $49,772 increase to $671,927 from $622,155 in December 2021.
However, a 7 percent decline in 2023 would result in a median home price of $624,892 at the end of next year.
Perth
From $578,751 in April 2022 to $532,451 by the middle of 2023, the median house price in Perth was projected to fall by 8%, or $46,300, bringing it back to its April 2022 level of $532,451.
The mining-rich capital of Western Australia was anticipated to experience a 2 percent increase this year, resulting in a $11,060 increase in the median house price to $564,073 from $553,013 at the end of previous year.
However, a predicted 5% decline in 2023 would bring prices to $535,870 by the end of the year.
Hobart
Hobart was anticipated to have a peak-to-trough decline of 16%, resulting in a median house price decline of $126,996 to $666,727 from $793,727 in April.
The Tasmanian capital was anticipated to experience a 5% price decline in 2022, with prices falling to $709,828 from $747,187 in December 2021.
A further 8% reduction in 2023 would bring prices down by $56,786 to $653,041, with a delayed recovery anticipated.
Darwin
From $576,149 in April 2022 to $507,011 by the middle of 2023, the median house price in Darwin was projected to fall by 12%, or $69,138, to $507,011.
Hobart was anticipated to have a peak-to-trough decline of 16%, with the median house price falling by $126,996 to $666,727 from $793,727 in April.
The Commonwealth Bank anticipated a flat result in 2022, followed by a 7% decline in 2023, resulting in a price decrease of $39,556 to $525,524 from $565,080 in December 2021.
Canberra
The median house price in Canberra was anticipated to fall by $171,235, from $1,070,215 in April to $898,985 in May.
The national capital was projected to have a 4% decline in 2022, resulting in a $40,636 price decrease to $975,264 from $1,015,900 at the end of last year.
In 2023, a further 8% decline would result in a median house value decline of $78,021 to $897,243.