Key facts
- Australian house prices are expected to fall by approximately 10% nationally.
- This projected decline would be the steepest property market downturn in the postwar period.
- Economists anticipate the Reserve Bank will proceed with a fourth interest rate hike.
- The RBA views the housing market downturn as secondary to the primary concern of inflation.
- Economic data may indicate Australia's economy grew by only 0.1% in the June quarter.
Australian house prices are heading for a historic 10% drop from their peak, according to new data from Cotality, with prices falling in over 90% of suburbs. This downturn is attributed to a combination of rising interest rates, a weak economy, and changes in property investor tax treatment. Shane Oliver, AMP’s chief economist, predicts this decline, the steepest in the postwar period, will continue for six to nine months. CBA analysts forecast specific drops for major cities, with Sydney and Melbourne potentially seeing 12-13% decreases. Despite these losses, Oliver notes that housing affordability will remain a significant issue, as prices are still substantially higher than a year ago. Reserve Bank Governor Michele Bullock indicated that the housing market downturn is not the primary driver for interest rate decisions, emphasizing that inflation remains the main concern. Economists, including Oliver and Jonathan Kearns, a former RBA official, anticipate the Reserve Bank will proceed with a fourth interest rate hike in November to combat high inflation. Belinda Allen of CBA expects the Australian economy to show minimal growth, with GDP expanding by only 0.1% in the June quarter, underscoring that inflation remains elevated despite the economic slowdown.