Commonwealth Bank predicts double digit house price falls in Sydney, Melbourne and Canberra in 2023


Australia’s biggest home lender is expecting property prices to fall by 12 per cent soon after official interest rates go up again.

The Commonwealth Bank is forecasting double-digit plunges in Sydney, Melbourne, Canberra and Hobart in 2023, following strong gains since the end of 2020.

Philip Lowe, the Governor of the Reserve Bank of Australia, is now indicating the cash rate will be raised from a record low of 0.1 per cent in 2023 instead of 2024 as previously promised.

But the Commonwealth Bank’s head of Australian economics Gareth Aird is predicting interest rates will now be raised in November 2022, marking the first cash rate increase in 12 years. 

Property prices across much of Australia are expected to continue to rise before plummeting in 2023 (pictured, a house for sale in Melbourne’s Carlton North) 

Australia's biggest home lender is expecting property prices to fall by 12 per cent soon after official interest rates go up again (pictured is auctioneer Jesse Davidson at Strathfield in Sydney's inner west)

Australia’s biggest home lender is expecting property prices to fall by 12 per cent soon after official interest rates go up again (pictured is auctioneer Jesse Davidson at Strathfield in Sydney’s inner west)

‘The Australian housing market is in the twilight of an incredible boom that has been fuelled by record low mortgage rates,’ he said.

Commonwealth Bank predictions for home prices

SYDNEY: 2021 (Up 27 per cent); 2022:  (Up 6 per cent); 2023 (Down 12 per cent)

MELBOURNE: 2021 (Up 17 per cent); 2022 (Up 8 per cent); 2023 (Down 10 per cent)

CANBERRA: 2021 (Up 26 per cent); 2022 (Up 7 per cent); 2023 (Down 10 per cent) 

BRISBANE: 2021 (Up 26 per cent);  2022 (Up 9 per cent); 2023 (Down 8 per cent)

ADELAIDE: 2021 (Up 22 per cent);  2022 (Up 6 per cent); 2023 (Down 8 per cent)

PERTH: 2021  (Up 13 per cent); 2022 (Up 3 per cent); 2023 (Down 9 per cent)

HOBART: 2021 (Up 29 per cent); 2022 (Up 5 per cent); 2023 (Down 12 per cent)

DARWIN: 2021 (Up 17 per cent); 2022 (Up 7 per cent); 2023 (Down 8 per cent)

Source: Commonwealth Bank of Australia forecasts for dwellings or houses and units together

Mr Aird is now predicting the Reserve Bank will raise the cash rate to 1.25 per cent by the September 2023, a level unseen since mid-2019, which ‘lies at the heart of our expectation that home prices will contract’. 

Should that prediction materialise, the RBA would be raising rates five times, on each occasion by 0.25 percentage points judging by previous moves.

The Commonwealth Bank is expecting Sydney property prices to climb by 27 per cent in 2021, before slowing to 6 per cent in 2022 and plunging by 12 per cent in 2023.

In the year to October, Sydney’s median house price surged by 30.4 per cent to an even more unaffordable $1.334million, CoreLogic data showed. 

CBA forecast Melbourne prices rising by 17 per cent this year, before growing by a more subdued 8 per cent in 2022 and diving by 10 per cent in 2023. 

Melbourne’s mid-point house price has grown by an annual pace of 19.5 per cent to $972,659 as Canberra’s equivalent value rose by 29 per cent to $985,040. 

Canberra was also tipped to see double-digit falls, following a 26 per cent rise in 2021, a 7 per cent gain in 2022 before a 10 per cent plunge in 2023.

Hobart prices were tipped to surge by 29 per cent in 2021 followed by 5 per cent growth in 2022 and a 12 per cent plunge in 2023. 

Since October 2020, house values in the Tasmanian capital have climbed by 27.2 per cent to $726,955. 

Australia wide, property prices were tipped to grow by 22 per cent in 2021, 7 per cent in 2022 before plummeting by 10 per cent in 2023.

In the year to October, house and apartment values nationally rose by 21.6 per cent, marking the sharpest annual increase since early 1989.

By comparison, wages in the year to September edged up by just 2.2 per cent.

The mid-point national property price of $686,339 is now so dear someone earning an average, full-time salary of $90,329 would owe the bank six times their salary, even with a 20 per cent deposit.

The Australian Prudential Regulation Authority considers a debt-to-income ratio of six or more to be risky. 

Mr Aird said strong property price growth could not be sustained as wages growth remained weak.

In the year to October, Sydney's (pictured) median house price surged by 30.4 per cent to an even more unaffordable $1.334million, CoreLogic data showed

In the year to October, Sydney’s (pictured) median house price surged by 30.4 per cent to an even more unaffordable $1.334million, CoreLogic data showed

The Commonwealth Bank is forecasting double-digit increases in Sydney, Melbourne and Canberra in 2023, following strong gains since the end of 2020 (pictured is an auction at Strathfield)

The Commonwealth Bank is forecasting double-digit increases in Sydney, Melbourne and Canberra in 2023, following strong gains since the end of 2020 (pictured is an auction at Strathfield)

Philip Lowe, the Governor of the Reserve Bank of Australia, is now indicating the cash rate will be raised from a record-low of 0.1 per cent in 2023 instead of 2024 as previously promised

Philip Lowe, the Governor of the Reserve Bank of Australia, is now indicating the cash rate will be raised from a record-low of 0.1 per cent in 2023 instead of 2024 as previously promised

‘As home prices move higher, affordability becomes stretched,’ he said.

‘That can be improved via a reduction in mortgage rates or higher income. 

‘But at some point the tailwind of lower mortgage rates on prices wanes unless there are further cuts in interest rates.’

The Commonwealth Bank is expecting house prices across Australia to rise by 25 per cent in 2021 before slowing to 6 per cent in 2022 and falling by 11 per cent in 2023.

Apartment values were expected to rise by 14 per cent this year, 9 per cent next year and fall by 7 per cent in 2023. 

Australia’s biggest banks have already raised their fixed rate home loans multiple times in a matter of weeks, gradually ending the era of 2 per cent mortgage rates.

‘The phenomenal lift in prices is not over yet given dwelling prices are still rising briskly in most capital cities,’ Mr Aird said.

Melbourne's (pictured) mid-point house price has grown by an annual pace of 19.5 per cent to $972,659 as Canberra's equivalent value rose by 29 per cent to $985,040

Melbourne’s (pictured) mid-point house price has grown by an annual pace of 19.5 per cent to $972,659 as Canberra’s equivalent value rose by 29 per cent to $985,040

But the Commonwealth Bank's head of Australian economics Gareth Aird is predicting interest rates will now be raised in November 2022, marking the first cash rate increase since November 2010 which 'lies at the heart of our expectation that home prices will contract' (pictured is a Strathfield auction)

But the Commonwealth Bank’s head of Australian economics Gareth Aird is predicting interest rates will now be raised in November 2022, marking the first cash rate increase since November 2010 which ‘lies at the heart of our expectation that home prices will contract’ (pictured is a Strathfield auction)

‘But near term indicators of momentum coupled with the recent move higher in fixed rate mortgages suggest that conditions will moderate from here.’ 

Regional areas have done even better than capital cities, with prices rising by 24.6 per cent compared with 24 per cent in the capital cities during the past year.

Before the pandemic, younger first-home buyers willing to commute could buy a house on the Central Coast, an hour’s drive north of Sydney.

But mid-point house prices there have surged by 35.4 per cent in the year to October to $954,330 as more people were able to work from home.

Woy Woy, on the Brisbane Water and near a train station, is even more expensive at $962,538.

Queensland’s Sunshine Coast saw a 32.5 per cent increase, taking median house prices to $946,405, making it much dearer than nearby Brisbane’s $731,392.

Victoria’s Mornington Peninsula had a 33.5 per cent increase, taking its mid-point price for a home with a backyard to $979,554, making it marginally more expensive than greater Melbourne’s $972,659.

The Commonwealth Bank is expecting Sydney property prices to climb by 27 per cent in 2021, before slowing to 6 per cent in 2022 and plunging by 12 per cent in 2023 (pictured is a house at Kellyville in Sydney's north west)

The Commonwealth Bank is expecting Sydney property prices to climb by 27 per cent in 2021, before slowing to 6 per cent in 2022 and plunging by 12 per cent in 2023 (pictured is a house at Kellyville in Sydney’s north west)

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