Yahoo Finance RBA predicts 20% housing drop
Australia’s housing market could fall 20 per cent from its peak by the end of 2024, according to previously secret modelling by the Reserve Bank of Australia (RBA).
This is based on the RBA’s “downside housing price scenario” in which Australians become increasingly pessimistic about the property market due to rising interest rates and falling prices.
In documents released under Freedom of Information, one RBA economist said this could be the biggest hit to the Australian property market since the early 1980s.
Also read: Property prices to plummet up to $144,000
Also read: The new property hotspot: Where Aussies are flocking to live
Also read: Property prices drop $175k: Aussies face ‘mortgage prison’
The fall would be double what the RBA previously predicted.
As a base case, the RBA expects house prices to fall by 11 per cent nationally by late 2023 - peak-to-trough - before levelling out.
Prices in Sydney and Melbourne are likely to drop 1.5 per cent a month over the rest of 2022.
But this drop could be even larger - 20 per cent by the end of 2024 - if people respond negatively to the fall in prices and higher interest rates.
"We're now anticipating housing prices to decline over the next few years," RBA documents said.
“That reflects the ongoing slowing in momentum in the market and the steepening of expectations for the future path of interest rates.”
The RBA has hiked interest rates for the past six months, taking the official cash rate from a record low of 0.10 per cent to 2.60 per cent.
The central bank is expected to continue raising interest rates in its last two meetings of the year.
House prices fall
The central bank is particularly concerned about the weak Sydney and Melbourne markets.
National housing prices fell in the June quarter, which surprised RBA economists, given it came before households began feeling the strain from rising interest rates in May.
Sydney home values are now down 10.1 per cent, CoreLogic data found, since the city reached its peak in February 2022.
The double-digit decline is equivalent to approximately $116,500.
It follows a surge of 27.9 per cent, or roughly $252,900, in Sydney’s housing values from the COVID trough to peak.
Melbourne home values have dropped 6.4 per cent since January 2022.
Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to the free Fully Briefed daily newsletter.
