House prices predicted to drop across Australian capitals next year

Mortgage holders could be in for a bumpy ride in the next 18 months with prices predicted to drop by more than $200,000 in Sydney alone by the end of next year.

According to RateCity analysis of ANZ’s new property price forecasts, the national media house price could fall by $150,518 by the end of 2023.

Sydney prices could take the biggest hit, with predictions of a $204,543 drop, bringing the median price for a home down to $1,141,650. In Melbourne, prices are predicted to fall by $128,141, while in Brisbane, the expectation is a $164,667 fall, bringing the median price down to $719,669.

Adelaide is predicted to experience the deepest percentage cut next year, down -17 percent to $539,452.

But before homeowners start liquidating assets, ANZ is predicting calmer seas for 2024, with price rises across all capitals.

For those already in the market, the biggest impact could be on those looking to refinance. RateCity points out that those without at least 20 percent equity in their homes will be unable to refinance, relegating them to ‘mortgage prison’. Those who took advantage of the Federal Government’s low deposit scheme are considered to be the most at risk.

Australia’s commodity-rich economy recorded its weakest growth momentum since the early 1990s in the second quarter, as consumers and businesses continued to feel the impact of high interest rates, with little expectation of a reprieve from the Reserve Bank of Australia in the near term.

The economy grew 0.2% in the second quarter from the first, with annual growth running at 1.0%, the Australian Bureau of Statistics said Wednesday. The results were in line with market expectations.

It was the 11th consecutive quarter of growth, although the economy slowed sharply over the year to June 30, the ABS said.

Excluding the Covid-19 pandemic period, annual growth was the lowest since 1992, the year that included a gradual recovery from a recession in 1991.

The economy remained in a deep per capita recession, with gross domestic product per capita falling 0.4% from the previous quarter, a sixth consecutive quarterly fall, the ABS said.

A big area of weakness in the economy was household spending, which fell 0.2% from the first quarter, detracting 0.1 percentage point from GDP growth.

On a yearly basis, consumption growth came in at just 0.5% in the second quarter, well below the 1.1% figure the RBA had expected, and was broad-based.

The soft growth report comes as the RBA continues to warn that inflation remains stubbornly high, ruling out near-term interest-rate cuts.

RBA Gov. Michele Bullock said last month that near-term rate cuts aren’t being considered.

Money markets have priced in a cut at the end of this year, while most economists expect that the RBA will stand pat until early 2025.

Treasurer Jim Chalmers has warned this week that high interest rates are “smashing the economy.”

Still, with income tax cuts delivered at the start of July, there are some expectations that consumers will be in a better position to spend in the third quarter, reviving the economy to some degree.

“Output has now grown at 0.2% for three consecutive quarters now. That leaves little doubt that the economy is growing well below potential,” said Abhijit Surya, economist at Capital Economics.

“But if activity does continue to disappoint, the RBA could well cut interest rates sooner,” Surya added.

Government spending rose 1.4% over the quarter, due in part to strength in social-benefits programs for health services, the ABS said.