Homeowners can expect their property to keep falling in value for months even after the Reserve Bank stops hiking interest rates, economists warn.
Price falls are set to continue because potential homebuyers’ borrowing capacity will be eroded over time as banks slowly pass on the rate rises to new and existing customers.Economists predict the declines will be orderly, and do not expect a mass of distressed sales following the end of a large proportion of fixed-rate mortgages this year.
once national home values slumped 8.4 per cent from their peak by January – and was forecast to be the largest factor in 2023, as opposed to distressed selling which they hope will remain uncommon.Barrenjoey was forecasting a peak-to-trough decline in house prices of 15 per cent; senior economist Johnathan McMenamin said he expected a 30 per cent fall in borrowing capacity.
However, a disproportionately large portion of fixed-term mortgages constituted a large risk to the property market, CoreLogic head of research Eliza Owen said. “The official guidelines for whether or not you’re able to repay a loan is three percentage points above the product rate and the Reserve Bank rates have already risen that much.”“What we might see is people try to hold back from selling their homes as long as possible and that will make the cycle more drawn out,” he said. “As people have to sell we might see the rate of decline pick up again.”
Commonwealth Bank head of Australian economics Gareth Aird said prices should stagnate by the end of the year.
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