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Prices forecast to decline as much as 10pc in 2023: PropTrack

A new report from PropTrack shows property prices are on track to drop between seven and 10 per cent in 2023, with faster-than-anticipated interest rate rises to blame.

Sydney, Brisbane and Canberra are tipped to experience the biggest declines, according to the PropTrack Property Market Outlook February 2023, with values in each city predicted to fall between eight and 11 per cent.

The price forecast was based on the cash rate rising a further 50 basis points (starting with a 25 basis point rise in February) before remaining on hold for the rest of 2023.

PropTrack Director of Economic Research and report author, Cameron Kusher, said the fastest rate tightening cycle in decades had exacerbated the property market downturn.

“As interest rates have risen faster and higher than expected, property prices have fallen, along with sales volumes,” Mr Kusher said.

“While we don’t expect interest rates to rise as fast and high as they did in 2022, we are expecting some additional increases early on in 2023.

“We expect two 25 basis point cash rate hikes from the Reserve Bank of Australia, one to be delivered today. Following this, we expect a period of interest rate stability.”

Depending on how the economy performs during 2023 there was even the potential for rates to be cut later in the year, he added.

For now though, the increased cost of mortgage repayments and the limit on how much new buyers could borrow would continue to weigh on the market.

Borrowing capacities slashed

PropTrack reported that a further 50 basis point hike to the cash rate would see borrowing capacities fall by around 30 per cent.

“With borrowing costs continuing to rise and the subsequent reduction in borrowing capacities,
property price falls are likely to continue and accelerate in 2023, with the more expensive cities
likely to see the largest price falls,” Mr Kusher said.

While Melbourne and Hobart are forecast to experience further price declines of between seven and 10 per cent each, other capital cities were tipped to hold up better.

Prices in Adelaide and Darwin are tipped to decline by between three and six per cent each while Perth is expected to see falls of between five and eight per cent.

Mr Kusher said that it was important to keep these declines in perspective when looking at any price forecast.

“After exceptional price growth throughout the pandemic, last year’s changing market
conditions saw prices fall 2.3 per cent,” he said.

“With prices down 4.3 per cent from their peak, a fall of up to 10 per cent this year would result in cumulative declines of close to 15 per cent since the start of the downturn.

“Importantly, this fall would represent a decline of around half that of the decline in borrowing
capacities and would still have national home prices sitting above their pre-pandemic levels.”

Key listing metrics blow out

The report also found that the number of new listings has been trending lower since March 2022.

The volume of new stock coming to market was 24.8 per cent below December 2021 levels in December 2022.

Median days on market have also blown out to sit at 42 days in the final month of 2022, up 10 days from the record low recorded 12 months earlier.

The number of enquiries per listing on was down 34.6 per cent year-on-year in December 2022, PropTrack reported.

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Jack Needham

Jack Needham was a Digital Editor at Elite Agent in 2022 & 2023

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