Domain range

Even Domain thinks Australian house prices will fall

Earlier this week, ANZ Bank updated its forecast for Australian house prices in the nation’s capitals, now saying they will fall 8% by the end of 2022 and 18% by the end of 2022. end of 2023:

ANZ predicts a major drop in property prices.

In particular, house prices in Sydney are expected to fall by 14% in 2022 and a further 6% in 2023. While prices in Melbourne are expected to collapse by 11% in 2022 and 6% in 2023.

You know the Australian property market is in trouble when even Domain CEO Jason Pellegrino is tip a peak to trough decline in home values ​​of up to 15%:

“Prices have started to drop, listing activity has also started to calm down”…

“Agents, sellers and buyers need to meet in the middle, have logical and rational discussions rather than a situation we saw last year where there was a lack of supply and a very steep demand curve. , especially because of FOMO (fear of missing out)”….

“We believe that the decline [in house prices] will be between 10% and 15%”.

Domain is notoriously bullish on real estate and usually posts market-inflating articles.

Therefore, we should view his projected price decline of 10% to 15% from peak to trough as conservative; although its magnitude depends on how aggressively the Reserve Bank of Australia (RBA) raises interest rates.

Forward Market Interest Rate Forecast

Futures market pricing implies mortgage rates of around 7%.

For example, if the latest futures market forecast comes true and the official cash rate drops to 3.6% by April next year (implying a reduced variable mortgage rate of 6.95%) , then Australia would see a significant drop in house prices, probably more than 20%. .

But if the RBA stops well before its monetary tightening, then the falls will obviously be smaller.

The hammer is with the RBA. Pass the popcorn.

Unconventional economist
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