The note said that prices in Australia’s two largest cities had been falling for a few months. But he also said this followed a 25% rise in house prices in Sydney in 2021 and a 15% rise in Melbourne over the same period.
The updated forecast comes amid investor fears that a faster series of rate hikes could mean more mortgage borrowers are facing financial problems, causing banks’ shares to fall as of Tuesday. The fall continued on Thursday as CBA shares fell another 2.6%, Westpac fell 3.7% and ANZ Bank National Australia Bank both fell 2.3%
Economists lowered their growth forecasts after rising rates on Tuesday, and Aird predicted that higher rates would cause economic growth to slow significantly to 2.1% in 2023, compared to the expected growth of 3.5% this year.
Financial markets are betting that the cash rate will be around 3% by the end of the year, compared to the current 0.85%.
The CBA had previously thought the cash rate would be set at 1.6 per cent next year, but now believes the RBA will raise rates to the “contractionary” level of 2.1 per cent by the end this year.
Unlike most market economists, Aird expects the rate hike to slow the economy to such an extent that the RBA will have to change direction in the second half of 2023 and move to lower rates. interest.
RBA Governor Phil Lowe noted this week that the central bank would further raise interest rates and financial markets are betting that the cash rate will be about 3% by the end of the year, compared to 0.85% current.
Most market economists still think this is unlikely, and UBS economist George Tharenou said this week that if the RBA made markets raise prices, this “would probably put housing and it would cause a recession. “
The Market Recap newsletter is a summary of the day’s trading. Get it every weekday afternoon.