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House prices to plunge but owners will still be miles ahead


The Commonwealth Bank has tipped house prices in Brisbane could fall by as much as 8 per cent in 2023.

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But before panic sets in, the bank expects Brisbane home owners to see an average rise of 26 per cent this year and 9 per cent in 2022. Even with the forecast rout in 2023, home owners would still be way ahead.

On top of that, CoreLogic said that property values for the past two decades showed that nominal dwelling value growth had vastly outstripped the total change in wages and salaries.

“While wages increased 81.7 per cent in the past 20 years, Australian home values have grown 193.1 per cent. This has been further exacerbated by the recent upswing in national housing values, which has seen Australian dwelling values rise 22 per cent in the past 13 months,” CoreLogic said.

But when the fall in property prices does come it’s likely to be felt much harder in Sydney, Melbourne and Canberra. Hobart was expected to suffer the most with a fall of 12 per cent forecast, but only after two years of increases worth a total 34 per cent.

Nationally, the bank has tipped a 10 per cent average fall in 2023.

The bank has also forecast a rise in the RBA’s cash rate, which is the benchmark for lending, in November 2022 of .15 per cent, taking the cash rate to .25 per cent.

“We expect that to be followed by an increase of 25 basis points (.25 per cent) in December 2022,” it said.

“We have three further 25 basis point hikes in the first, second and third quarters of 2023 that take the cash rate to 1.25 per cent. ”

The bank said the Australian housing market was in the twilight of an incredible boom that has been fuelled by record low mortgage rates.

But it said the intervention of banking regulator, APRA, and a lift in fixed rate mortgages as well as actions by the Reserve Bank would all have a dampening effect on the market.

“The impact of rising interest rates will be quite significant on borrowing capacity and credit demand given the percentage change will be large,” it said.

However, offsetting the rise in rates would be an expected period of full employment. Wages growth would have also finally pushed towards 3 per cent by late 2022. The stronger wages would partly offset the rate increases and increased migration should improve the demand for real estate.

It said a 10 per cent fall may sound large but it had to be considered in the context of the huge increases that had come before it and would only take prices back to where they were in the third quarter of this year.

But CommBank said a cooling market was not the same as a falling market.

“Prices are still rising at a reasonable pace and near-term momentum indicators like auction clearance rates and the house price expectation index … point to home prices continuing to rise at a softening pace, which now sits around 1 per cent a month,” the bank said.


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