- Prices have continued to press lower, down 1.2% in Dec and 1.1% in Jan. While Feb is tracking a much milder 0.1% fall.
- Westpac Melbourne Institute's ‘time to buy a dwelling’ index declined 4.3% over the quarter to February, a new cycle low.
- The bank predicts prices will decline 8% more in 2023 before lifting 2% in 2024 as interest rate cuts begin from the RBA.
Ahead of next week’s RBA meeting, Westpac has lifted its official cash rate forecast to a peak of 4.1 per cent, indicating that there will be further rate hikes in the near future.
According to Westpac’s Housing Pulse forcast, higher than expected interest rates will also continue to drag on the economy and lead to an eight per cent decline in national dwelling values in 2023, with the housing market correction remaining in full swing.
Westpac predicts that the largest falls will occur in Melbourne, with values dropping 10 per cent in 2023, while Sydney and Hobart would drop eight per cent, with Brisbane and Adelaide ending the year six per cent down.
The report said, “Housing-related sentiment remains very weak led by an extended run of pessimistic reads on ‘time to buy a dwelling,’ rising interest rates clearly still over-riding any price-driven improvements in affordability.”
Prices across the five major capital cities have already dropped 9.7 per cent from their peak in April 2022, with nearly all sub-markets recording price declines into year-end according to CoreLogic.
The report notes, “Prices have continued to press lower, down 1.2 per cent in Dec and 1.1 per cent in Jan. While Feb is tracking a much milder 0.1 per cent fall, some of this also appears to be due to the first home buyer policy changes in NSW, slower declines elsewhere likely reflecting a passing hope at the start of the year that the RBA may be about to pause its rate tightening cycle.”
The Westpac Melbourne Institute ‘time to buy a dwelling’ index declined 4.3 per cent over the three months to 73.9 in February, a new cycle low.
The index has been tracking very low levels for a year now, an unusually long period of weakness by historical standards.
Westpac said, “2023 will be another challenging year, particularly as the RBA continues to ratchet interest rates higher in the first half of the year.”
The bank predicts that prices will decline a further eight per cent nationally in 2023 before lifting two per cent in 2024 as interest rates will begin to be cut by the RBA.
Rate cuts to come next year
Westpac chief economist Bill Evans said the Australian economy would be “stagnating” by the end of 2023 under the weight of rate hikes.
Mr Evans said this would trigger the Reserve Bank to begin cutting rates in the March quarter of next year, but warned there was a risk they could move too late.