- The largest falls are expected in Sydney (-8% to -11%).
- Rates rose from 0.1 to 3.1 during 2022.
- New stock has declined to 24.8 per cent below Dec 2021.
Property prices across the country could fall by as much as 10 per cent, as the impact of interest rate rises weighs on homebuyers according to a new report.
The PropTrack Property Market Outlook February 2023 Report predicts prices to decline across all capital cities in 2023, with the largest falls expected in Sydney (-8 per cent to -11 per cent), Brisbane (-8 per cent to -11 per cent), Canberra (-8 per cent to -11 per cent), Melbourne (-7 per cent to -10 per cent), and Hobart (-7 per cent to -10 per cent).
The smaller capital cities are expected to fair slightly better with Adelaide (-3 per cent to -6 per cent), Darwin (-3 per cent to -6 per cent), and Perth (-5 per cent to -8 per cent) performing best.
PropTrack Director of Economic Research Cameron Kusher said as interest rates have risen faster and higher than expected, property prices have fallen, along with sales volumes.
“At the beginning of May 2022, official interest rates were sitting at 0.1 per cent,” Mr Kusher said.
“By the end of 2022, the cash rate had increased to 3.1 per cent – the highest it has been since November 2012 – due to the fastest and most substantial interest rate tightening cycle in many decades.
“While we don’t expect interest rates to rise as fast and high as they did in 2022, we are expecting some additional increases early on in 2023.”
One more rise to come?
Mr Kusher said he expects one more interest rate rise after this week’s 25 basis point increases from the RBA, followed by a period of interest rate stability.
However, an interest rate cut late in 2023 is a very real possibility depending on how the economy performs.
“With borrowing costs continuing to rise and the subsequent reduction in borrowing capacities, property price falls are likely to continue and accelerate in 2023, with the more expensive cities likely to see the largest price falls,” Mr Kusher said.
“We’re expecting prices to decline by up to 10 per cent nationally in 2023, with greater falls expected in the larger capital cities.
“Demand for regional properties is also likely to slow and, given prices have seen stronger growth in these areas than within the capital cities, we expect to see price falls in these markets too.”
According to the report, most of the key sales metrics have also fallen away from record-high levels.
Preliminary sales volumes were 16.5 per cent lower in 2022 compared to the prior year, however, they were 16.9 per cent higher than 2019, the last year not affected by the pandemic.
The total number of properties listed for sale was 6.3 per cent higher year-on-year, with overall supply increasing as sales volumes slow.
However, the volume of new stock coming to market has trended lower since its peak in March 2022, sitting 24.8 per cent below December 2021 levels in December 2022.
Views-per-listing on realestate.com.ay was also down 34.6 per cent year-on-year while the length of time a property was listed for sale increased to 42, up 10 days compared to December 2021.
“After exceptional price growth throughout the pandemic, last year’s changing market conditions saw prices fall 2.3 per cent,” Mr Kusher said.
“With prices down 4.3 per cent from their peak, a fall of up to 10 per cent this year would result in cumulative declines of close to 15 per cent since the start of the downturn.
“Importantly, this fall would represent a decline of around half that of the decline in borrowing capacities and would still have national home prices sitting above their pre-pandemic levels.
“The strong labour market, with unemployment the lowest it has been in decades and wage growth accelerating, may also support the housing market.”
