Median home prices in Sydney could drop below $1m by the end of next year, new modelling suggests.
In Melbourne, the median price could drop to about $700,000.
Finance website RateCity has used the Commonwealth Bank of Australia’s housing market forecasts – which show increasing interest rates and falling house prices – and applied them to units and apartments as well.
In Sydney, the median house price at 28 February was $1,410,128. The forecasts show that would drop by almost $200,000 to $1,213,686 by the end of 2023 with a drop of 3% this year and 9% next year.
Once that is expanded to all dwellings, the median price now is $1,116,219. It would fall by $146,651 to $969,568.
Melbourne would drop from $799,756 to $701,842. All other capital cities showed further increases this year, followed by decreases next year, leading to overall price increases.
Nationally, there would be an 8% drop in dwelling and house prices.
The website’s research director, Sally Tindall, said it could signal “the beginning of the end” of property price peaks in Melbourne and Sydney.
“If CBA forecasts are realised, the median dwelling price in Sydney could fall by almost $150,000 by the end of 2023,” she said.
“If house prices follow the same trajectory, we could be looking at drops of almost $200,000 for a median-priced house in Australia’s largest city from today to the end of 2023.”
New Australian Bureau of Statistics and CoreLogic figures published yesterday show house price growth slowed in February despite record housing loans.
The Grattan Institute’s economic policy program director, Brendan Coates, said lower prices would make housing more accessible for first homebuyers, but that they would face higher interest rates.
“Lower rates have been the biggest driver of rising prices, so you should expect the inverse to hold as well,” he said.
“There’ll be one-third of the population that celebrates house prices falling and two-thirds that lament it.”
Tindall said any price drops came “off the back of monumental gains” that had sent equity “skyrocketing”.
“People might not like the idea of losing equity in their home over the next couple of years, but it’s worth looking at the bigger picture,” she said.
“While falling property prices can be stressful for anyone buying at or near the peak, if they keep their head down and their mortgage repayments up, they should be able to ride out any dips.”
On the other hand, Tindall said, price drops could help people enter the property market.
“However, would-be first homebuyers should crunch the numbers before they pop the champagne,” she said.
“If property prices fall on the back of rising rates, buyers might not need to stump up as much for a deposit. They will, however, need to make higher monthly repayments, which means they won’t be able to borrow as much from the bank.
“First homebuyers should think carefully about overextending themselves in a market where rates are set to rise and prices are forecast to fall. Make sure you have a buffer to ride out any bumps.”
