Property prices Australia: Home prices tipped to dive in wake of RBA rate hikes – but still remain well above pre-pandemic levels

Property prices across the country are tipped to fall up to another 5 per cent before the year is out, a new report forecasts.

The mid-year report by market analyst PropTrack predicts the average property price nationally will drop between 2 per cent and 5 per cent by the end of December.

By the end of next year, they are expected to fall further, potentially as much as another 10 per cent.

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PropTrack director of economic research and report author Cameron Kusher said the research highlighted the rapidly changing housing market.

“While there were already some signs that the rate of price growth was slowing at the beginning of this year, we were not expecting interest rates to rise until early 2023,” he said.

“There’s since been an outbreak of inflation, resulting in the Reserve Bank (RBA) lifting rates in each of the three months to July 2022.”

Property prices across the country are tipped to fall up to another 5 per cent before the year is out, a new report forecasts. Credit: JAMES ROSS/AAPIMAGE

The cash rate is currently 1.35 per cent but is expected to be hiked for a fourth consecutive month when the board meets on Tuesday.

That follows the release of the latest consumer price index figures, showing Australia’s inflation rate had risen to 6.1 per cent.

The PropTrack research operates on the assumption that the cash rate would rise to between 2.5 per cent and 3 per cent by the end of 2022.

They would then be subject to further hikes at the beginning of 2023 before remaining on hold, with the potential to be reduced late in the year or early into 2024.

Watch more on the RBA’s rate decisions in the video below

Kochie rips into RBA over rate rises.

Kochie rips into RBA over rate rises.

“The recent run-up in prices, coupled with reducing borrowing capacities as interest rates rise, is likely to see price falls broaden and then accelerate further into 2023, with the more expensive cities expected to record the largest price falls,” Kusher said.

The report predicts that the most expensive cities, Sydney and Melbourne, will lead the falls in prices.

They would decline between 3 per cent and 6 per cent this year and 9 per cent and 12 per cent in 2023.

According to PropTrack, the average price of a house and unit in Sydney is $1,435,000 and $780,000 respectively, meaning a worst-case scenario would shave $86,100 off the price of a house and $46,800 off the price of a unit before the year is out.

Hobart’s prices are forecast to decline between 1 per cent and 4 per cent this year and 7 per cent and 10 per cent next year.

Darwin’s are projected to drop between 0 per cent and 3 per cent this year and between 4 per cent and 7 per cent next year.

Canberra’s are projected to decline between 3 per cent and 6 per cent this year and 7 per cent and 10 per cent next year.

The only capital cities forecast to show a growth in prices for the rest of the year are Adelaide and Perth.

Property prices in both cities are forecast to increase by between 2 per cent and 5 per cent.

Brisbane’s prices may also increase, with a projection of between 2 per cent growth and 1 per cent decline.

The report, however, isn’t all good news for prospective buyers.

Even if there was a 15 per cent fall in property prices by the end of next year, home prices would still be well above the level they were prior to the pandemic.

“Although, home prices have grown at an exceptional pace over the last two years, rising 34 per cent since the pandemic onset in February 2020.”

The report predicts that the most expensive cities, Sydney and Melbourne, will lead the falls in prices. Credit: DAN HIMBRECHT’S/AAPIMAGE

Economists predict another interest rate hike when the RBA board meets on Tuesday following the release of Australia’s inflation rate, which jumped to 6.1 per cent.

Treasurer Dr Jim Chalmers said the figures were “not news” to many Australians.

But he did forecast more interest rates would follow.

“They’ve flagged themselves, the Reserve Bank Governor has said that there are more interest rate rises to come and people need to brace for that,” he said.

“I’m not prepared to nominate a number. The Treasury, when they make their forecasts, they use an assumption about what the market is expecting and it’s not really for me to do that.

“But interest rates are going to go up further, and that will make life harder for people who are already dealing with these skyrocketing costs of living.”

Moment woman steals puppy from a pet shop.

Moment woman steals puppy from a pet shop.

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