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ANZ Bank tips a 20 PER CENT plunge in house prices

The ANZ bank is now tipping that house prices in Australia’s largest cities will fall 20 percent by the end of 2023 as interest rates continue to rise – wiping out $263,000 from a typical home.

Sydney and Melbourne are expected to be the hardest hit real estate markets, with borrowers weathering the Reserve Bank’s strongest rate hikes in nearly three decades.

They were far from the only markets at risk, and Hobart and Canberra are also expected to decline in 2022.

Meanwhile, prices are expected to rise in Brisbane, Adelaide and Perth this year, but fall in 2023.

ANZ senior economists Felicity Emmett and Adelaide Timbrell expect house prices in the capital to fall by nine percent in 2022, followed by a nine percent drop in 2023 – or 18 percent over two years.

“A sharp rise in mortgage rates between May and the end of this year will weigh heavily on house prices,” they said.

The ANZ bank is now tipping house prices in Australia's largest cities will fall 20 percent by the end of 2023 as interest rates continue to rise - wiping out $263,000 from a typical home (pictured is a Melbourne home)

The ANZ bank is now tipping house prices in Australia’s largest cities will fall 20 percent by the end of 2023 as interest rates continue to rise – wiping out $263,000 from a typical home (pictured is a Melbourne home)

“The biggest factor driving prices down is reduced borrowing capacity, not an increase in forced sales.”

ANZ HOUSE PRICE PREDICTIONS

SYDNEY: 14 percent down in 2022; a 6 percent drop in 2023; an increase of 6 percent in 2024

MELBOURNE: 11 percent down in 2022; a 6 percent drop in 2023; an increase of 6 percent in 2024

BRISBANE: up 1 percent in 2022; a 12 percent drop in 2023; an increase of 5 percent in 2024

ADELAIDE: 4 percent higher in 2022; a 17 percent drop in 2023; an increase of 2 percent in 2024

PERTH: up 1 percent in 2022; a 12 percent drop in 2023; an increase of 3 percent in 2024

HOBART: 9 percent down in 2022; an 8 percent drop in 2023; an increase of 4 percent in 2024

DARWIN: Apartment in 2022; a 12 percent drop in 2023; an increase of 3 percent in 2024

CANBERRAE: 7 percent down in 2022; a 9 percent drop in 2023; an increase of 4 percent in 2024

Sydney would do even worse, falling 14 percent in 2022, followed by a 6 percent drop in 2023, representing a 20 percent loss over two years.

Should this prediction come true, Sydney’s median home price would fall by $192,496 this year — from its $1,374,970 level in December 2021 — to $1,182,474, based on CoreLogic data.

Next year, the median home price is set to fall another $70,948 to $1,111,526, with rates rising that will wipe out $263,444 of a typical suburban Sydney home in two years.

Melbourne was tipped with an 11 percent drop in 2022, followed by a 6 percent drop in 2023 – or 17 percent over two years.

That would mean the median home price plunges $109,772 this year, with values ​​ranging from $997,928 to $888,156.

This would be followed by a drop of $53,289 in 2023, pushing prices back to $834,867.

Brisbane’s average house price would rise 1 percent this year but fall 12 percent next year, taking it from $782,967 to $695,901.

Adelaide’s average value would rise 4 percent in 2022, before falling 17 percent next year, bringing the price from $622,155 to $537,044.

Prices in Perth were predicted to rise 1 percent, followed by a 12 percent drop next year, pushing prices from $553,013 to $491,518.

Hobart, one of Australia’s stronger markets during the pandemic, is expected to see a 9% drop in 2022, followed by an 8% drop in 2023, which would drop the Tasmanian capital’s median home price from $747,187 to $79.99. 625,545.

Sydney and Melbourne (Glen Iris auction, pictured) expected to be the hardest hit real estate markets, with borrowers weathering the Reserve Bank's strongest rate hikes in nearly three decades

Sydney and Melbourne (Glen Iris auction, pictured) expected to be the hardest hit real estate markets, with borrowers weathering the Reserve Bank's strongest rate hikes in nearly three decades

Sydney and Melbourne (Glen Iris auction, pictured) expected to be the hardest hit real estate markets, with borrowers weathering the Reserve Bank’s strongest rate hikes in nearly three decades

Borrowers in May, June, July and August have already weathered 1.75 percentage points of the Reserve Bank’s rate hikes — the steepest rise since 1994.

The ANZ bank expects the RBA to raise cash interest rates, now at a six-year high of 1.85 percent, to a ten-year high of 3.35 percent in November – with rate hikes of 0.5 percentage points in September, October and on Melbourne Cup Day.

“Reduced borrowing capacity will be the main driver for lower prices in our view,” ANZ said.

“Our forecast that the cash interest rate will reach 3.35 percent represents a reduction in borrowing capacity of nearly 30 percent.

“This diminished ability to pay will push prices down in the coming months.

‘Data on home financing already show that the average new mortgage size is starting to decline.’

Should ANZ’s forecast come true, a borrower with an average mortgage of $600,000 would owe their bank $1,060 more per month in November, compared to May, when the RBA cash rate was still at a record low of 0.1 percent. was standing.

The minutes of the August meeting of the Reserve Bank, released Tuesday, revealed that board members were particularly concerned about the rise in wages that would raise inflation.

“It was possible that labor market conditions continued to surprise positively, especially given that falling real wages made hiring labor more attractive for some employers,” ANZ said.

They were far from the only markets at risk, with Hobart, Canberra and Darwin falling in 2022 as prices fell next year in Brisbane, Adelaide and Perth.

They were far from the only markets at risk, with Hobart, Canberra and Darwin falling in 2022 as prices fell next year in Brisbane, Adelaide and Perth.

They were far from the only markets at risk, with Hobart, Canberra and Darwin falling in 2022 as prices fell next year in Brisbane, Adelaide and Perth.

What borrowers could pay each month in November compared to May?

$500,000: $883 up from $1,922 to $2,805

$600,000: $1,060 up from $2,306 to $3,366

$700,000: $1,236 up from $2,691 to $3,927

$800,000: $1,413 up from $3,075 to $4,488

$900,000: $1,590 up from $3,459 to $5,049

$1,000,000: $1,767 up from $3,843 to $5,610

Calculations based on spot interest rising from a record low of 0.1 percent in May to 3.35 percent in November, as forecast by ANZ. Monthly repayments based on a popular Commonwealth Bank variable rate hike from 2.29 percent to a projected 5.39 percent

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