“We’re seeing house values in Sydney now fall at the fastest rate since the early 1980s, and in Melbourne, almost as fast as we saw during the global financial crisis,” Lawless said.
loading
“It looks like this decline will be relatively sharp, and perhaps also short, depending on what happens with interest rates. But it’s reasonable to expect that this rate of decline will probably get worse before it gets better.”
The regions where the price drops are the steepest are often the ones that saw the biggest increases early in the pandemic, he says, meaning that while the decline in valuations may seem steep, prices are still far behind. about where they were three years ago.
“The market has quite a bit of room for values to fall, and the vast majority of owners will still be in a positive position compared to what they paid for their property,” he said.
However, some economists have warned that a complete reversal of the strong price gains made during the pandemic could be possible in some regions.
Shane Oliver, AMP’s chief economist, said the country’s housing market was “rapidly losing altitude”, forecasting that average property prices would fall by 15-20%, as rates of interest continue to rise and housing supply is increasing in Sydney and Melbourne.
“Assuming the cash rate rises above around 2.6 percent early next year, as we expect, average prices are likely to fall 15 to 20 percent top to bottom, and it’s the minimum is likely to be reached in the second half of next year,” he said.
“The fall in house prices in this cycle could see some cities, notably Sydney and Melbourne, reverse all or much of the price boom from their pandemic lows in 2020, which is likely to result in negative capital gains for recent buyers with low deposits.”
However, the economist acknowledged that the decline was still within the bounds of the typical cyclical nature of the housing market “albeit a bit faster”.
loading
For aspiring home buyers or sellers, Lawless advises against trying to time the market, saying people should work within the scope of their own financial circumstances. However, he acknowledged that selling conditions are likely to remain difficult from here, with the RBA likely to keep raising rates until Christmas.
“We are not seeing any signs of panic selling or dumping [housing] shares in the market, but in the spring that will start to reverse, and you will see a lot more newly listed properties coming to the market at a time when demand is negatively affected,” he said.
“This means that, for buyers, there will be a lot more choice, less competition and less urgency – they can bargain hard.”
Business Briefing offers top stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.