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Expert predicts more pain for homeowners with home prices plummeting another $100K in 2023 as Reserve Bank prepares to raise interest rates again this week
- Property prices are expected to fall 11 percent
- Prices could drop more than $100,000
House prices around Australia are expected to drop by an average of more than $100,000 this year.
National Australia Bank chief economist Alan Oster said Australia’s economy is struggling with a growth forecast of just 0.7% for 2023.
‘Unemployment will rise a little but not excessively. Property prices are down 6 percent in 2022, they will be down another 11 percent this year,’ he told the herald sun.
Mr Oster said the crash will come as a “slow burn” with its full effects not being felt until later this year.
An 11 per cent drop in home values would cause a decrease of $132,000 in Sydney and $107,000 in Melbourne.
Property prices in Brisbane are expected to fall 15.1 per cent, to an average of $118,000.
Property values around Australia are expected to fall by 11 per cent this year, with major cities expected to face losses of more than $100,000 on average.
ANZ has also forecast house prices to fall 11 per cent, while Commonwealth Bank economist Gareth Aird believes there will be a 15 per cent drop ‘from peak to trough’.
“The sharp increase in interest rates, which has translated into significantly higher mortgage rates, has affected both the willingness and ability to borrow,” he said.
‘For context, the RBA 300 [basis points] of rate hikes already applied has reduced borrowing capacity by approximately 25 percent.’
ANZ has forecast that house prices will start to rise by about five per cent in 2024.
Compounding the situation is the lack of available housing in Australia, as the country prepares to welcome some 200,000 immigrants this year.
With another rate hike due on Tuesday, thousands of Australians who trusted Reserve Bank Governor Philip Lowe’s advice after he said rates would stay low until 2024 now feel cheated.
Hundreds of homeowners who bought homes at price ceilings are now dealing with loans that are greater than the value of their property, known as negative equity.
Reserve Bank Governor Philip Lowe faces harsh criticism ahead of another rate hike on Tuesday after predicting rates would stay low until 2024 (RBA pictured)
Renters are also bearing the brunt of continued rate increases, facing $100 weekly increases as landlords struggle with sky-high payments.
Dr Lowe has apologized for his failed prediction, but it is of little comfort to the nearly 600,000 Australians who bought property relying on predictions of continued low interest rates.
The Governor of the Reserve Bank will be renewed in September.
He will face a governing committee on February 17.
Garth Hamilton, a boyfriend MP for the Queensland regional Federal National Liberal Party, will sit on the committee, describing Dr Lowe’s prediction as “extraordinary”.
Westpac senior economist Matthew Hassan believes the RBA should have raised rates in early 2021.
The bank now forecasts another three 0.25% rate hikes this year and four 0.25% falls in 2024.
However, Hassan predicts only an eight percent drop in property value in 2023.