Dwelling prices in Australia are likely to fall by 10% next year with the expectations of rising cash rate.
NAB group chief economist Alan Oster said while the housing market has remained strong despite the pandemic-related disruptions, prices have risen strongly across capital cities.
“The strength in prices has been broad-based, with even the capitals experiencing the slowest growth seeing price rises well-above 10% for the year,” he said.
Over the past year, Hobart and Brisbane have led the gains, though Sydney and Adelaide have not been far behind at well over 20% through the year.
While Perth, Darwin, and Melbourne lagged in terms of growth, they still achieve gains of above 11%.
Mr Oster said two factors are likely to commence a correction in prices: affordability constraints ad rising mortgage rates.
“This would offset gains seen in early-2022, so that overall, prices end the year roughly flat,” he said.
Based on the forecast, the average growth of capital cities this year is slated to be at 2.7%, with Brisbane and Hobart still expected to lead the gains with above 4% annual growth.
“NAB continues to see the RBA beginning to normalise rates from November with the cash rate target lifted by 65 bps from 0.1% by February 2023,” Mr Oster said.
“From there we see a steady series of increases over 2023 and 2024.”
Mr Oster said that the rate hikes would see prices decline by as much as 10% annually in 2023.
The decline is projected to be apparent across all state capitals, with Sydney and Melbourne possibly recording the most substantial fall of 11.4%.
“We see this as a relatively orderly decline, and it is important to remember this correction comes after a very sharp run up in prices over the last year,” Mr Oster said.