Sydney, Melbourne real estate: house prices set to fall
There is bad news for homeowners with warnings that the overheated housing market will collapse much sooner than expected.
Soaring house prices are expected to stagnate across Australia through May and even fall by the end of December, according to Westpac, before falling dramatically in the coming years.
The big bank predicted that overall house prices will only rise 2% for the whole of 2022.
That’s a stark difference from the huge 22% rise in house prices in 2021 – the biggest annual growth since 1989.
Westpac further predicted that house prices in Australia would fall by 7% in 2023 and another 5% in 2024 in its latest report.
However, from three months to February, Westpac Housing Pulse reports showed the Australian property market actually rose 2.5%, while properties sold in Sydney and Melbourne are still well above long-term averages. .
But Westpac predicted that fear of rising inbound interest rates as well as rising inflation will have a chilling effect on the housing market.
“Housing will be ‘collateral’ damage in the RBA’s efforts to keep inflation on target over the medium term,” warned Matthew Hassan, senior economist at Westpac.
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Mr Hassan also pointed out that signs of a slowdown were already visible, although “extremely low levels” of inventory still weighed on the market.
“Auction markets softened a bit late in the year and appear to have started 2022 with a similar tone,” he said.
For the week ending February 20, Sydney auction activity topped 1,000 for the first time in 2022 with a clearance rate of 75.6%, but that was a dramatic drop from the win rate 83.4% at auction in the same period last year.
Meanwhile, successful auctions nationwide reached 74.6%, compared to 79.6% recorded in the same period last year.
However, Mr Hassan added that the influences of Covid and the summer holidays also made the market outlook difficult to predict.
But Queensland was one state set to reverse the disastrous price trend, its report said, as it ended the year “with an extraordinary 10% change of hands in the housing stock”.
Price momentum in Queensland also bucked the broader slowing trend seen nationwide, with a blistering 8.5% gain, Westpac found.
“Remarkably, annual price growth in Brisbane is now just under 30% per year. The detail shows particularly large gains for ‘top tier’ homes and properties,” Hassan said.
“West Brisbane led initial gains but outer suburbs such as Ipswich are now generating gains.
“Regional performance varies considerably, with the Gold and Sunshine Coast showing comparable performance.
is gaining in Brisbane but Cairns, dependent on international tourism, is posting barely double-digit growth.
Westpac had previously forecast house prices to rise 8% in the first half of 2022, before stagnating for the rest of the year.
Nationally, home prices are expected to fall 14% between 2021 and 2024.
Westpac also predicted that the RBA’s record 0.1% interest rate will rise from August, which would impact housing affordability and how much people could borrow.
According to CoreLogic, the typical Australian house price now sits at $718,146.
Yet someone earning an average salary of $90,329, who had a 20% deposit, would still fall under lending regulations.
A $574,517 mortgage based on typical home prices would still see their debt-to-income ratio remain at 6:3.
However, the Australian Prudential Regulation Authority considers a debt-to-income ratio of six to be a red flag, which could see a borrower struggle to meet monthly mortgage repayments.