House prices will fall even further next year, with an overall drop of 23 percent in some states between 2022 and 2023, according to the National Australia Bank.
Across Australia, most capital cities, except Sydney, will take a brutal blow to house prices in 2023 after they surge during the pandemic, the bank predicts.
Surprisingly, Hobart will see its biggest drop in home prices next year, with prices set to fall 16.6 percent, after falling 6.4 percent this year, NAB found.
This will lead to home prices in Hobart falling by as much as 23 percent in just two years – meaning a whopping $174,000 could be cut from an average home price of $758,000.
However, house prices in Melbourne were expected to fall further to 23.2 percent over the next two years, according to the bank’s quarterly housing market survey.
This would be 9.1 percent by 2022, before accelerating to 14.1 percent next year, a nearly $220,000 reduction from the price of an average three-bedroom home worth $947,000 in the city.
Sydney is expected to experience the biggest drop in house prices this year at 12.9 percent, followed by an additional 9.4 percent in 2023.
This will cause house prices overall to plummet by 22.3 percent in one of Australia’s most expensive housing markets, bringing in a whopping $345,000 for a $1.55 million home.
Despite a less-than-expected interest rate hike of 0.25 percent this month, pushing interest rates up to 2.6 percent in October, higher interest rates are reducing buyers’ borrowing power and are the main driver of declines in property prices, NAB noted in its statement. quarterly survey. .
It predicted that rates will rise to 3.1 percent before breaking.
“Indeed, the two capitals most tied to affordability constraints – Sydney and Melbourne – have fallen the most,” the report said.
“So far Sydney and Melbourne have led the declines, but prices in other capitals now appear to have peaked as well. And the decline in Brisbane has accelerated.”
House prices in Brisbane were expected to start its year cautiously at 0.8 percent, before accelerating to 9.4 percent in 2023.
Both Adelaide and Perth are still set to see house prices rise 9.9 percent and 1.5 percent respectively this year, before plummeting next year.
House prices in Adelaide will fall by 16.3 percent, while Perth will fall by 13.9 percent in 2023.
Buyers are also shocked by the rising cost of renovation, which is a “quite”
significant” impact and instead means people are looking for fully renovated homes, the survey also found.
Real estate professionals believe that the top three considerations for homebuyers when buying a home are the amount they are willing to borrow to buy (82 percent), good local amenities (60 percent) and the size of the home (57 percent). ). cents), the report said.
There was still grim news for renters, but with low availability and rising rents well above house price growth.
Rents will rise by 3.5 percent in the next 12 months and by 3.8 percent nationwide over two years, the survey shows.
“With rents growing faster than house prices, gross yields should improve, with rents exceeding prices in all states,” the report said.
Rent growth is expected to be fastest in two years’ time in Western Australia at 5.1 percent, sharply revised from 2 percent earlier this year, and at 5 percent in the Northern Territory, followed by 4.1 percent in Victoria.
Property professionals in NSW were slightly more optimistic and now expect rents to grow by 3.7 percent over two years, the survey added.
“Apartment rents are growing most strongly in Sydney and Melbourne, where declines have been greatest, but also by more than 10 percent year-on-year in Brisbane and Adelaide,” it said.