One of Australia’s big four banks expects property price growth to slow dramatically before falling 10 per cent in 2023.
In its latest Residential Property Survey for the most recent quarter, NAB said with rate hikes on the horizon it expected prices to soon start dropping.
“We have brought forward the timing of the correction we expect in house prices to late 2022 as affordability constraints begin to bite and rising mortgage rates place downward pressure on prices,” the bank said.
“This would offset gains seen in early 2022, so that overall, prices end the year roughly flat.
“We see this trend continuing through 2023, ending the year around 10 per cent lower.”
The bank tipped the falls would be evident across the capital cities, but for larger falls to occur in Sydney and Melbourne, while Brisbane and Adelaide would see smaller drops.
The forecast is for property prices to fall 11.4 per cent in Sydney and Melbourne in 2023 and 6.4 per cent in Brisbane and 5.8 per cent in Adelaide.
Perth prices are expected to drop 8.1 per cent, while the smallest fall is tipped to be a 4.1 per cent drop in Hobart.
“However, we do not see these declines as disorderly, with the labour market remaining strong, wages growth picking up and rates still relatively low – though steadily increasing,” the bank said.
“More broadly, the economy has been remarkably resilient despite ongoing disruptions due to the virus.
“The fourth quarter of 2021 is now expected to see a full recovery as the Delta lockdowns eased, and while Omicron is expected to weigh on activity in early-2022, the impact is expected to be short-lived.
“With the economy expected to grow by around 3.6 per cent this year, and at around trend (2.5 per cent) next year, we see the unemployment rate declining further from here.
“Wages growth will pick-up as unemployment declines but is likely to strengthen only gradually.”
The bank tipped interest rates would remain at a record low of .1 per cent until November 2022.
“As wage pressure builds, the Reserve Bank of Australia will be more comfortable with inflation remaining sustainably within the target band,” the bank said.
“NAB continues to see the RBA beginning to normalise rates from November with the cash rate target lifted by 65 bps from 0.1 per cent by February 2023.
“From there we see a steady series of increases over 2023 and 2024.”
