Australian dwelling prices could fall 8% to 11% from their March peak before beginning to recover in 2027, according to a new property industry survey.
Homes are forecast to keep getting cheaper for about a year.
Property prices are tipped to fall between 8% and 11% from their March peak and will only start to recover by September 2027, a survey of 384 real estate experts by the The Australian Property Institute has found.
That means dwelling prices are only about halfway through a tailspin that has, according to property data firm Cotality, wiped away 5.2% of their value since March.
For Sydney and Melbourne, an 11% dip would pull property prices down to levels not seen since February 2021.
The news comes after CommBank economists downgraded their housing forecasts in September, saying they now expect prices to fall around 9% from peak to trough this cycle on a national basis, with declines of around 13% in Sydney and 12% in Melbourne.
What is pulling property prices down?
Australia scored 4.3 out of 10 on the Australian Property Institute’s index of property market strength in the three months to September 30.
This puts it on the weak side of the ledger, which the organisation warns “warrants a degree of caution”.
Victoria, NSW and Queensland fared poorest, scoring below five, with Victoria bringing up the rear at 3.7.
“Confidence is basically holding back market activity at the moment,” institute research head Sherman Chan told AAP.
“People are worried about more interest rate hikes on the horizon, and they are after greater clarity.”
Higher interest rates were the property experts’ biggest concern, followed by inflation and then the rollback of tax concessions for property investors.
The cash rate was lifted to a 15-year high of 4.6% at the Reserve Bank’s September 29 meeting, which governor Michele Bullock flagged may well be followed by more rises before the year is out.
The bank has made plain it is now willing to sacrifice jobs and ignore plummeting house prices to keep a lid on inflation, which an International Monetary Fund outlook on Tuesday forecast would stay above the RBA’s 2-3% target until the end of 2027.
The Middle East conflict, AI boom and well above-average temperatures caused by a super El Niño climate pattern are pushing up the prices of oil, technology and agricultural products, patterns without a clear end and largely beyond Canberra’s ability to tame.
Uncertainty about policy changes adds to caution
But Chan said the downturn could not be explained by interest rate anxiety alone.
“There’s a lot of wait and see,” she said.
“High inflation and cost-of-living concerns … doesn’t really justify the slump that we are seeing.
Negative gearing will be limited to new builds, and real capital gains taxed at a 30% minimum from July 2027, the same month the Australian Property Institute thinks a recovery could begin.
But that could come sooner if the government managed to give home buyers greater clarity about the changes before they entered force, according to Chan.
“I won’t rule that out,” she said.
“Some are even optimistic enough to think that it will rebound in the start of 2027, and some are more pessimistic, thinking that it will drag into 2028 – what we present is that medium perspective.”
Source: Commbank
