23/02/2023
Home prices have fallen in recent months and are expected to cool further throughout this year, but they remain significantly higher than pre-Covid levels. At a national level, property values are down 4.51% from their March 2022 peak, and are projected to fall 7% to 10% in 2023.
However, home prices nationally surged by 34.7% from the start of the pandemic to the peak in March last year. So, even if prices fall at the highest range of the forecast, national home values will still be a staggering 18% higher than they were pre-Covid.
Some secondary capitals forecast to see smaller dips in home prices.
Senior economists see that the pace of home price falls has clearly slowed in recent times, and it is expected home prices will likely continue to soften for several months as the impact of rate hikes flows through to the market. The forecast is for the September quarter to represent the bottom for national property prices, with turnover beginning to improve soon after, with some cities recovering earlier than others.
Price falls have been driven predominantly by the Reserve Bank’s rapid interest rate hikes, in a bid to crush red-hot inflation. Experts agree one or two further rate hikes of 25 basis points are expected, and thereafter rates are expected to remain on hold.
And there’s potential for the RBA board to even begin cutting the cash rate again in late 2023 or early 2024. A lower interest rate peak and earlier-than-expected interest rate cuts could ease price falls.
The annual rate of inflation in December was 7.8%, which was the highest level seen in decades, however, the quarterly measure was a little softer than expected.
House production costs have also eased, adding glimmers of hope that extremely high inflation is being contained.
There are signs that consumer spending is slowing, with data released last week showing Aussies are making thoughtful changes to their purchases to keep on top of increasing costs.
Four-in-10 consumers have reduced spending on entertainment, lunches and coffees, and cut the number of car trips they made.
Another third of consumers have scaled back holiday plans, cut back on spending on food delivery apps, or delayed a major household appliance purchase.
Experts also agree the RBA’s rate tightening cycle to top out soon, with the cash rate likely to peak at 3.6% in March before holding steady.