Well, there should be no surprise that home price growth is easing, and indeed prices are falling in some places up to the end of the year, as a combination of higher for longer interest rates, broader financial pressures, reduced borrowing capacity and even easing migration are all taking their toll. This despite assurances from Clare O’Neil that prices would not drop.
The reality is that gravity is finally catching up with the market. Many observers expected home prices to fall in response to the Reserve Bank of Australia’s (RBA) aggressive interest rate hikes, which made property significantly more expensive. However, prices defied gravity and increased due to record net overseas migration and acute stock shortages. But as a result, Australian property values have decoupled from borrowing capacity, resulting in historically low affordability. Realistically, home prices will continue to fall until the RBA cuts interest rates, increasing affordability and borrowing capacity. But even then, growth will be anemic at best, This is consistent with our three scenarios and our base case as reported in recent months.
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