first home buyers
Image – Canva.
  • NAB forecasts property prices to fall by as much as 20% from peak to trough
  • New loan commitments have fallen, although they have risen slightly among first home buyers
  • Ideal to "set a price in the sand" says Steve Mickenbacker of Canstar

With the recent rise in interest rates, and a reduction in buyers borrowing capacity, further falls in house prices have been predicted by property experts.

Financial comparison site Canstar said this will place increased pressure on first home buyers who are judging when to enter the housing market or not.

NAB forecasts property price falls of around 20% across the capital cities from the peak in April of this year to trough. Declines across the whole of 2022 and 2023 are predicted to be down by around 17.9%.

State capitals dwelling price projections based on NAB forecast
 

Region

Jan to Sep 22 Change NAB Forecast Total Chg Jan-22 to Dec-23 Inferred Chg Still to Come Median Value 30 Sep 2022 Loss by End 2023 Median Value by End 2023
Sydney -8.5% -21.1% -13.8% $1,053,131 -$144,876 $908,255
Melbourne -5.3% -21.9% -17.5% $774,531 -$135,906 $638,625
Brisbane 4.6% -10.1% -14.1% $746,017 -$105,019 $640,998
Adelaide 11.2% -8.0% -17.3% $649,983 -$112,307 $537,676
Perth 3.6% -12.6% -15.6% $558,879 -$87,438 $471,441
Hobart -2.0% -21.9% -20.3% $705,079 -$143,445 $561,634
Combined Capitals -3.6% -17.9% -14.8% $798,101 -$118,124 $679,977

This forecast follows ANZ’s 20% price decline prediction from the peak of housing in April this year through to the end of 2023.

Westpac predicts a 16% peak-to-trough fall, while CommBank expects a 15% fall over the same period.

Steering clear of the market

With rising interest rates resulting in reduced borrowing capacities, a growing number of buyers have steered away from the market.

This is reflected in ABS data which shows that lending for new loan commitments has fallen for three consecutive months, with the value declining from $32.39 billion in May 2022 to $27.39 billion in August 2022.

Lending to first home buyers, however, picked up for the first time in three months, with a 10% rise in August. The value of these new loans rose by 7% to reach $4.35 billion.

Steve Mickenbacker, Canstar’s finance expert, said the decision to buy while prices are predicted to fall has clearly made firth time buyers cautious when weighing up risks when to buy.

“A move to buy too soon will see first home buyers’ equity plummet alarmingly and leave them with a large debt,” he said.

“Conversely being conservative may see them miss out if price projections have been too alarmist.

“Price uncertainty is undoubtedly adding greater pressure to the decision for first home buyers who can alleviate some of the fears by setting their own price target for buying.”

Steve Mickenbacker, Canstar

Canstar analysis reveals purchasing at September 2022 valuations could see equity fall by by as low to 4.4% in Melbourne by the end of next year, or to just 1% in Hobart, based on NAB’s property price predictions

Impact on property equity from falling house prices
 

Region

30 September 2022 End 2023
Median Value 20%

Deposit

Loan Amount Median Value Loan Amount  

Equity $

 

Equity %

Sydney $1,053,131 $210,626 $842,505 $908,255 $830,136 $78,118 8.6%
Melbourne $774,531 $154,906 $619,625 $638,625 $610,528 $28,097 4.4%
Brisbane $746,017 $149,203 $596,814 $640,998 $588,052 $52,946 8.3%
Adelaide $649,983 $129,997 $519,986 $537,676 $512,352 $25,323 4.7%
Perth $558,879 $111,776 $447,103 $471,441 $440,539 $30,902 6.6%
Hobart $705,079 $141,016 $564,063 $561,634 $555,782 $5,852 1.0%
Combined Capitals  

$798,101

 

$159,620

 

$638,481

 

$679,977

 

$629,108

 

$50,870

 

7.5%

“The big banks are predicting that house prices are set to fall a lot further. The latest to join the crystal ball club is NAB, which predicts total falls of around 20% from the peak in April this year to the bottom, meaning big falls are yet to come,” added Mr Mickenbecker.

“Jumping in at today’s valuations will see buyers facing equity uncomfortably close to negative in all capitals by the end of 2023.

“Low equity and even negative equity, though unpalatable when your savings have been washed away, isn’t the end of the world provided borrowers can still meet their repayments.

“Housing price falls too will pass and borrowers who can afford repayments can wait it out, even if it may take years before they are ahead of their buying price. But borrowers who aren’t able to meet their repayments and who have low equity, can’t expect generous patience from their lender.

Mr Mickenbacker concluded by remarking that buyers will sooner or alter start to fear missing out, making it wise to suggest a price line in the sand.

“Rather than aiming for the bottom of the market they might consider entering when prices fall to within 5 percent of predictions or within 5 percent of the market turning up.

“Either entry point reduces the risk.

“The only certainty about house prices is that there is no sure thing. Most house price predictions were wrong when COVID started and could be wrong again. What is important is that first home buyers go into the buying decision eyes wide open to the risks.”

~~

Before making any investment decisions, please do your own independent research, taking into account your own situation. This article does not purport to provide financial or investment advice. See our Terms of Use.



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