RateCity’s analysis of ANZ’s latest house price forecast estimates that the median house price in Australia could fall by $150,518 – or 9% – over the next 16 months.
House prices in Sydney are set to fall the most, although from a higher starting point, with the Financial Reporting Service predicting values in Australia’s most populous city will fall by $204,543 to rest at $1,141,650 by the end of 2023.
The second biggest driver is Adelaide, where prices are expected to fall $166,182 – or 17% – to $539,452, followed by a drop of $164,667 in Brisbane.
PerthPerth, TAS Perth, WA is the capital expected to experience the smallest drop in value of $88,556 – or 12% – to $498,468.
RateCity research director Sally Tindall explained that this cycle is a “classic case of what goes up, can go down”.
“However, the declines are not likely to come close to the huge gains in house prices over the past two years.
“As interest rates rise, people find they can borrow less because they have to pay more of their monthly salary to the bank in interest,” she added.
The bleak outlook for property owners is further compounded by predictions that such a drop in values will ultimately result in many borrowers ending up in “mortgage prison,” in which they do not own a decent enough portion of their property. and, as such, are unable to refinance.
This is because borrowers need to own at least 20% of their property in order to refinance if they wish to avoid being stung by their new creditor with expensive mortgage loan insurance.
Additionally, borrowers with negative equity will likely find that lenders are very unwilling to accept them.
These issues could prove particularly troublesome for first-time home buyers who capitalized on the previous federal government’s low deposit program, who RateCity says are most likely to be affected.
According to the firm’s analysis, by the end of 2023, someone who bought a median-priced house in Sydney in December 2021 using a 10% down payment could owe the bank 8% more than the value of his home by the end of next year. if ANZ’s predictions materialize.
By the end of 2024, they could owe the bank almost exactly as much as the property would be worth.
A similar scenario is likely to play out for Melbourne residents who bought a home in December 2021 with a 10% down payment; they could end up owing the bank 4% more than their home is worth by the end of 2023.
Ms Tindall offered landlords a reprieve, saying ‘being in mortgage jail is not a life sentence, but based on current property forecasts it could take several years to get out of it’.
“If there’s a chance your equity will fall below 20% in the coming months, do a mortgage health check now and consider your options before it’s too late,” he said. she urged.
Another bright spot offered by RateCity is that ANZ predicts the market will recover in 2024; however, these future values will still be significantly lower than they are now.
Sydney and Melbourne are expected to see the biggest increases, at 6% each, peaking with a median house price of $1,210,149 and $887,018 respectively in December 2024. Conversely, house prices in Adelaide is only expected to rise 2% to $550,241 in that same time.
Ms Tindall believes that ‘an increase in demand from people looking for a bargain could turn the market around sooner than expected’.
“Investors could also return to the market sooner if rents continue to rise as house prices fall.
“People who bought at the high shouldn’t let the news of falling house prices drag them down. What is important for them is that they keep a cool head and that their mortgage repayments increase,” she concluded.
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Property refers to something tangible or intangible over which an individual or business has legal rights or ownership, such as houses, cars, stocks, or bond certificates.
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