CBA tips capital city housing to dive over 2023
The major bank has updated its Australian property forecast, stating that homes across the country’s capitals will fall by potentially 10 per cent.
The major bank’s position comes in the wake of data released by CoreLogic earlier this week, which reported that the monthly median value of Australian housing decreased over May by 10 basis points, marking the first recorded decrease since late 2020.
These findings reflected a similar conclusion made by rival outfit PropTrack, which said property prices across the country sank by 11 bps over the same period – the first recorded fall since the start of the COVID-19 pandemic.
According to CoreLogic, this reduction was felt at its strongest in capital cities, which declined by 0.3 per cent over the month – driven almost entirely by Sydney and Melbourne, which reported losses of 1 per cent and 0.7 per cent, respectively.
This was the NSW capital’s fourth consecutive dip in house value.
Comparatively, capital cities reported a monthly 30-bp lift over April, with Sydney reporting a loss of 20 bps over the period and Melbourne remaining stable.
CBA has said that part of this decline was the result of a reduced demand for housing, with the major bank attributing Melbourne’s loss of appetite to affordability constraints, higher interest rates and high debt levels.
CBA senior economist Belinda Allen added that this fall has come at a time when “supply of dwellings for sale is above average in Sydney and Melbourne”.
“Falling auction clearance rates have also been observed in both [Sydney and Melbourne],” Ms Allen said.
Further, the big four bank said that a lack of supply was supporting prices across Australia’s smaller capital cities and regional areas, with CoreLogic’s data stating that Adelaide reported a lift of 1.8 per cent in May, and regional Australia a rise of 50 bps.
According to SQM Research, the current vacancy rate in Adelaide is 0.4 per cent.
In response to this data, CBA has tweaked its expectations for Australia’s property market, stating that dwelling prices in the eight capital cities will reach a “broadly flat outcome” over 2022, with supply chain disruptions and building constraints potentially supporting prices over the short to medium term.
However, CBA has said that prices will eventually drop by 8-10 per cent over 2023.
Earlier this year, CBA said that house prices would peak in mid-2022 before flattening, and eventually sinking over 2023.
The major bank said, at the time, that it also expected the cash rate to be lifted by 1.25 per cent by the end of 2023’s first quarter (Q1).
CBA now predicts the cash rate to be 35 bps higher than it initially anticipated.
“Our forecast profile for home prices is conditional on a gradual and shallow RBA tightening cycle that takes the cash rate to 1.60 per cent by Q1 2023,” Ms Allen said.
“Falling dwelling prices and lower housing turnover will impact on the demand for consumer goods, particularly those related to the housing sector.
“This is one area worth watching closely over coming months.”