Westpac says Australia’s housing market boom is showing clearer signs of slowing with sentiment pointing to a decline in turnover through the first half of 2022. More importantly, the medium term outlook has shifted materially with an interest rate tightening cycle now expected to see a broad-based correction phase begin later this year, continuing throughout 2023 and into 2024.
According to Westpac’s February 2022 Housing Pulse report, the housing market boom is showing clear signs of slowing with sentiment pointing to a decline in turnover through the first half of 2022.
The report detailed how inflation and labour market challenges are shaping the view on interest rates, which will impact the property markets and further divergence among states.
As lenders already begin to raise rates, ahead of the Reserve Bank of Australia’s cash rate rise, and house prices soar, a housing “correction” is forecast for 2023 and 2024.
Nationally, prices lifted 2.5 per cent since November 2021, which was a fall from the peak of 7.1 per cent in May 2021, but an annual gain of 21.1 per cent.
The “extraordinary” surge in prices has seen affordability deteriorate with new projections now forecasting house prices will “flatten” by May this year, ahead of a move into outright correction in the December quarter.
Overall, that would see a net gain of just 2 per cent over 2022.
House prices are then forecast to fall 7 per cent in 2023 and by a further 5 per cent in 2024, before stabilising towards the end of that year.
Nationally, the peak to trough fall of 14% is around the average of corrections seen historically.
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