House prices are tipped to fall. Image – Canva
  • At the RBA's latest meeting another cash rate hike was announced
  • Jarden predictions estemate property prices will fall around 5% by the end of 2022
  • Simmilarly CommBank forcausts about 6% decline this year

As the Reserve Bank of Australia (RBA) continues to drive up the cash rate property prices economic commentators are having their say on how the property market will fair.

At the RBA’s latest meeting, another cash rate hike was announced. This third consecutive rise saw the cash rate rise from 0.85% to 1.35%.

Following the announcement, RBA Governor Philip Lowe highlighted that heightened is a global trend.

“Monetary policy globally is responding to this higher inflation, although it will be some time yet before inflation returns to target in most countries,” he said.

Despite the global effort, Mr Lowe indicated that it may be some time yet before inflation returns to target in most countries.

Jarden Chief Economist Carlos Cacho believes the end is not in sight for cash rate hikes and the property market is likely to feel the pain. He adjusted his expectations following

“With a newly hawkish RBA now likely to hike to 2.5% by end-2022, we downgrade our housing forecasts with material falls in home loans, credit growth, prices and building approvals,” he said.

Mr Cacho predicts that rising interest rates will see a 25% reduction in borrowing capacity, something that is likely to impact house prices.

“This is likely to flow through to faster and larger house price falls than we earlier than expected and we now forecast prices will fall ~5% by end-2022 and a further 10-15% over 2023,” Mr Chacho said.

This equates to a total 15-20% peak-to-trough decline with falls in Sydney and Melbourne expected to be larger and faster.

“This would be the largest house price correction since at least 1980, in both real and nominal terms.”

Carlos Cacho, Jarden Chief Economist

While he foreshadows a significant decline in house prices, Mr Cachos believes a modest recovery will begin in late 2023.

CommBank Chief Economist Stephen Halmarick has some slightly different projections for the housing markets.

“Mortgage rates will rise. They have been going up with the cash rate rise. We do think house price growth will continue to moderate.

“We’ve seen house prices start to fall. We expect to see them down about 6% this year and down another 8% next year.

“We do think both the housing market and the consumer spending will be softer in the months ahead.”

While they may not have a conscience on the figures, one thing that both economists agree on is that house prices will fall.


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