Property prices in Australia’s two largest cities are expected to plunge 18 per cent by the end of next year.
A Westpac economist has predicted that Sydney and Melbourne will soon suffer a massive decline, with property values in the NSW capital forecast to fall 10 per cent this year and then another 8 per cent in 2023.
The report also found that Melbourne was the opposite, expected to drop 8 per cent this year and 10 per cent next.
Hobart property owners are also set to miss out, as homes in Tasmania’s capital are set to be affected by 14 per cent over the next 18 months.
In all, the author of Westpac’s August Housing Pulse report, Senior economist Matthew Hassan warned that the situation looked “grim”.
“The housing slowdown that started at the beginning of the year has accelerated and widened in the last three months,” he said.
Nationwide, property prices are still expected to fall 16 percent over the next 18 months.
According to the report, “corrections are well advanced and firmly entrenched” in New South Wales, Victoria and Tasmania, with those states set to see the biggest declines.
Queensland and the ACT have been mostly spared, however their prices are “just beginning to fall”.
Meanwhile, Western Australia and South Australia are bucking the trend by continuing to grow marginally.
Hassan blamed the sudden recession on the Reserve Bank of Australia’s (RBA) decision to raise interest rates, which have been raised every month since May, saying it had “undermined confidence” around the purchase of properties.
Home turnover is down 18 percent since the start of the year.
Prices in the five major capitals are down 2.7% in the three months to July and are on track for a 1.5% drop for the current month.
Some property sales, around 20 percent, make less than 5 percent profit. Just over half of this ‘at risk’ group is in Sydney and Melbourne.
There has been a “rapid change” in fortunes in New South Wales, according to the report, with a 30 per cent drop in home turnover since January, while Sydney house prices are already down more than 7 percent.
Perhaps unsurprisingly, the areas in NSW that saw the biggest gains last year, during a period when national house prices rose by 25 per cent, now need to be corrected.
“On a sub-regional level, prices are reversing faster in the eastern suburbs, North Beaches and North Sydney, which fared better during the boom, but are holding up better in the outer western suburbs that stayed put. behind in the rally,” the report noted.
“Regional slowdowns have been more abrupt for Illawarra and Byron Bay.”
Victoria is not doing much better with turnover down by a third since the start of last year, although the research noted it had a “high starting point” when turnover hit a 14-year high in 2021.
House prices in Melbourne are already around 4.5 per cent below their peak and are falling between 1 and 1.5 per cent per month.
North East and Inner South Melbourne were named and shamed as the two “leading declining” areas.
According to forecasts, Hobart’s housing market is also not safe, forecast to fall 6 per cent for the rest of this year, followed by an 8 per cent drop next year.
It was slightly better for Brisbane, Perth and Adelaide, which will continue to grow through 2022. Although homes in those three cities will lose value next year, it will only be in the single digits.
Last week, ANZ published a similarly sobering outlook on the state of Australian property.
Like Westpac, the bank warned that the most significant price declines will be seen in our two largest cities, Sydney and Melbourne, but the report noted that the trend would occur nationally, including in regional areas and in all capitals on Monday. next year.
Driving the gloomy trend was a “sharp rise in mortgage rates between May and the end of this year,” coupled with reduced borrowing capacity, with capital city prices tipped down 18 percent before rising. 5 percent by the end of 2024.