Another of banking’s big four has added its voice to the chorus predicting a drop in housing prices is on the horizon.
The Commonwealth Bank of Australia says Australia’s housing prices will drop by 10 per cent as prices start to moderate next year before dropping significantly in 2023.
It is the latest banking institution to join the growing consensus that house prices will correct in 2023: Westpac predicted softer changes in dwelling prices up 8 per cent in 2022 and down 5 per cent in 2023, similar to the ANZ’s assertion of a 6 per cent rise before dropping 4 per cent.
Meanwhile, NAB had witnessed a fall in property sentiment from experts and predicted 4.9 per cent growth next year.
Sydney and Hobart would be the hardest hit capital cities with prices expected to drop 12 per cent in 2023, according to the CBA, however, if the 2022 price increases were included, the impact was less severe.
The prediction for high-density developers was more promising with units to increase by 9 per cent next year before dropping by 7 per cent in 2023, creating a 2 per cent increase overall.
CBA dwelling price forecasts
^Source: CBA, Corelogic
CBA head of Australian economics Gareth Aird said the predictions took into account higher fixed mortgage rates, affordability constraints and natural fatigue after a period of extraordinary price gains.
“Our expectation for the RBA to commence normalising the cash rate in November 2022 means that we expect national dwelling prices to peak in late 2022 around 7 per cent higher than end 2021 levels,” Aird said.
“We expect an orderly correction in home prices of around 10 per cent in 2023 as the RBA takes the cash rate to 1.25 per cent by the third quarter of 2023.”
ANZ senior economist Felicity Emmett unpacked the impact of interest rate decisions and said the Reserve Bank was more concerned about the amount of housing credit in comparison to wage growth, and mortgage serviceability rather than house prices.