Australian property prices to fall 8%

CBA predicts the median house price across Australia will drop by 8 per cent in 2023. (Source: Getty)

Australia’s property prices are set to drop 8 per cent as the overheated market finally runs its course, Commonwealth Bank predicts.

Recent data showed nationwide home price growth has already slowed considerably during the first two months of 2022.

• Also read: Eye-watering sale price of Sydney home once sold for $153,000

• Also read: What property you can buy for less than $1 million in Australia’s biggest cities

• Also read: Sydney home prices fall for the first time in 17 months

And the trend looks set to continue.

According to CoreLogic, property prices rose by a modest 0.3 per cent across the eight capital cities in February, a significant dip from the 1.6 per cent monthly growth seen throughout 2021.

Sydney's housing market fell 0.1 per cent in February while Melbourne’s market was completely unchanged during the month, leading some to suspect the property boom may be over.

Commonwealth Bank had originally expected prices to rise at a modest pace during the first half of 2022 before cooling as higher fixed mortgage rates, affordability constraints and natural fatigue took hold.

But now the major bank admits the “cooling influence we anticipated has been a lot stronger in Sydney and Melbourne, while prices rises have continued to rise briskly in other capital cities”.

In its latest home price outlook, the major bank has updated its forecast profile to take into account an early peak in Sydney and Melbourne property prices and a revised prediction of RBA tightening cash rates in June.

The bank’s dwelling price projections predict the median house price across Australia will drop by 8 per cent in 2023.

This includes a 3 per cent drop this year and a 9 per cent fall next year in both Melbourne and Sydney.

That means Sydney’s median house price could plunge $196,442 to $1,213,686 and the median house price in Melbourne could slide from $998,356 to $880,871.

Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to the free Fully Briefed daily newsletter.