Higher-than-expected increases in rates and inflation will cause the biggest housing slump since at least 1980, according to the major investment bank.
The housing market correction already underway could accelerate into the largest on record, with a peak-to-trough decline in prices of 15-20 per cent – and even more in Sydney and Melbourne – as borrowing costs rise more sharply, according to Jarden.while sticking to the central bank’s expectation that the cash rate will hit 2.5 per cent.
“Our forecast rate hikes would see around a 25 per cent fall in borrowing capacity by end 2022, with further downside risk as banks update their HEMs for higher essential inflation,” he wrote. “This is likely to flow through to faster and larger house price falls than we earlier expected, and we now forecast prices will fall around 5 per cent by end 2022 and a further 10-15 per cent over 2023 for a total 15-20 per cent peak-to-trough decline.”Price declines in Sydney and Melbourne were “likely to be larger and faster”, according to Mr Cacho.
“This would be the largest house price correction since at least 1980, in both real and nominal terms.”markets are now pricing in a 50 basis point rate jumpThe Jarden view chimes with an increasingly bearish view on house prices in recent days by analysts. Last week, Commonwealth Bank
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