Declining Housing Values Levelling Out
Last updated on December 14th, 2022
Even though housing prices across the country continue to decline, data from Corelogic seems to indicate that this reduction is now levelling out with the rate of decline consistently moderating since the national index dropped in August.
PropTrack senior economist Eleanor Creagh said the RBA remains committed to reigning in inflation. “If the cash rate peaks in 2023, as the major banks expect it to, home price falls are expected to ease as uncertainty and sentiment stabilise,” Ms Creagh said. On top of that, she pointed out that the blow from rate hikes on housing markets is being softened somewhat by “positive demand effects”. That includes tight rental markets, strong wages growth, supply constraints, and a swift rebound in migration numbers.
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Interest Rate Rise Cycle Pause Pending
Several economists are predicting a pause in the interest rate rise cycle as the RBA assesses the effects of sustained rises. It is expected that this will help trigger a recovery of capital city dwelling prices in 2023 that will be led by Sydney and Perth, according to SQM Research’s Christopher’s Housing Boom and Bust Report. The report’s base case scenario suggests that interest rates peak no higher than 4%, while inflation peaks at 8% and falls back to 5% and unemployment rises but stays below 5%. An interest rate hike pause is expected by June with the official rate to stay on hold for the rest of the year.
National dwelling prices in the base case scenario will rise between 3% to 7%, with Sydney to grow by 5% to 9%. According to the report the recovery in Sydney will be driven by the surge in underlying demand for residential property as a result of the rise in overseas arrivals, the return to the office, the existing shortage of rental accommodation, the new stamp duty and land tax changes and the expected ongoing strength of the Sydney economy.
Is The Rate Rise Cycle Drawing To An End?
Arguably, one of the biggest factors in building confidence is knowing when interest rates will reach their peak. Knowing what the terminal cash rate will be, that is, just how high rates will reach, will be key to driving future decisions. Many commentators anticipate that the RBA may lift rates two more times (0.25% each), bringing the expected peak cash rate to 3.35%. Once the terminal cash rate becomes clear, markets are more likely to look beyond this hiking cycle, which will likely support further market stabilisation.
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