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Home prices could drop $150,518 by next year

·Personal Finance Editor
·4-min read
A sold sticker on top of a for sale sign. Aerial view of red brick homes. Australian currency staked on top of each other.
ANZ predicted a massive fall in home prices by next year. (Source: Getty)

The national median home price could drop by $150,518 by the end of next year, according to new data.

Recently, ANZ predicted property prices across the country could fall 20 per cent by next year and RateCity.com.au analysed what that would mean for property prices in dollar terms.

The data found Sydney’s median house price had an estimated drop of $204,543 between July 2022 and the end of 2023, taking it to $1,141,650.

In Melbourne, the median house price could fall by $128,141 from July 2022 to the end of 2023 to $836,809, while prices could drop by more than $160,000 in Brisbane and Adelaide by the end of next year.

These figures are based on CoreLogic’s adjusted median values from December 2021, applying ANZ’s annual forecast.

Location

ANZ 2022 forecast

ANZ 2023 forecast

Dec 2023 forecasted median house price

Estimated drop July 22 – end 2023

Australia

-8%

-9%

$666,141

-$150,518

Sydney

-14%

-6%

$1,141,650

-$204,543

Melbourne

-11%

-6%

$836,809

-$128,141

Brisbane

1%

-12%

$719,669

-$164,667

Adelaide

4%

-17%

$539,452

-$166,182

Perth

1%

-12%

$498,468

-$88,556

Hobart

-9%

-8%

$648,310

-$134,438

Darwin

0

-12%

$493,506

-$96,242

Canberra

-7%

-9%

$871,949

-$175,963

Prices forecast to rebound in 2024

While steep price drops are expected between now and the end of 2023, ANZ is forecasting property price rises in all capital cities in 2024.

However, analysis from RateCity found property prices across the capital cities would still be substantially lower in 2024, than currently.

Location

ANZ 2024 forecast

Dec 2024 forecasted median house price

Australia

5%

$699,448

Sydney

6%

$1,210,149

Melbourne

6%

$887,018

Brisbane

5%

$755,652

Adelaide

2%

$550,241

Perth

3%

$513,422

Hobart

4%

$674,243

Darwin

3%

$508,311

Canberra

4%

$906,827

Concerns over ‘mortgage prison’

People who don’t own a decent portion of their property may find they can’t refinance for several years, putting them in ‘mortgage prison’, according to RateCity.

This is because borrowers need to own at least 20 per cent of their property in order to refinance, otherwise their new lender will hit them with costly lenders mortgage insurance, which could negate any potential savings.

Borrowers in negative equity are likely to find lenders aren’t willing to take them on at all.

First home buyers who took advantage of the Federal Government’s low deposit scheme, are among the borrowers most likely to be impacted.

RateCity analysis showed if someone bought a median-priced house in Sydney in December 2021 with a 10 per cent deposit, they could owe the bank 8 per cent more than their home was worth by the end of 2023, if ANZ’s forecasts were realised.

This is despite the fact they would have been paying down their debt for two years.

By the end of 2024, they could owe the bank almost exactly as much as the property would be worth.

Borrowers in Melbourne may also find themselves in a similar situation.

If they had a 10 per cent deposit when they purchased in December 2021, they could owe the bank 4 per cent more than their home was worth by the end of next year.

RateCity research director Sally Tindall said this was a classic case of what goes up, can come down.

“However, the drops aren’t likely to come close to the huge property price gains over the last couple of years,” Tindall said.

“As interest rates rise, people are finding they can borrow less, because they have to pay more of their monthly salary to the bank in interest.”

Tindall said the positive side was that falling prices might finally provide some first home buyers with a window in.

“Would-be buyers now have to pay significantly higher interest rates on prices that are still likely to be well above pre-COVID levels,” she said.

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