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When will house prices go back up?

Alex Ritchie avatar
Alex Ritchie
- 5 min read
When will house prices go back up?

Dwelling values around Australia fell throughout 2022, with rising interest rates partially to blame. However, new research indicates that house prices could start to rise again some time in 2023 - higher than previously forecast. 

Big bank predictions on the up for housing prices

At the start of the year, CoreLogic’s Daily Home Value Index for January hit a decline of -8.40% - officially the largest decline on record. Since then, conditions have improved very slightly - but not by much. The quarterly price changes as of March showed that every capital city besides Sydney experienced a drop in values, with a national dwelling change of -0.4% for the quarter, and -8.0% annually. 

New house price forecasting from big four bank ANZ suggests prices will increase by 10% in 2023, up from its previous forecast of 6%. 

Despite a year of increases to the cash rate by the Reserve Bank of Australia (RBA), ANZ is attributing the revision to its forecast to record migration, low listings and a tight rental market helping to ignite recovery in the housing market. 

ANZ house price predictions for 2023 & 2024

Capital city

2023 house price prediction

2024 house price prediction

Sydney

+2%

+2%

Melbourne

0%

+2%

Brisbane

-2%

+5%

Adelaide

+6%

-1%

Perth

+1%

+4%

Hobart

+8%

+2%

Canberra

+5%

+2%

Darwin

+4%

+3%

 Source: AFR.com

Earlier this year, as reported by the ABC, SQM Research’s Housing Boom and Bust Report forecast that capital city house prices may rise between 3% and 7% in 2023, or even between 5% and 9%, under ideal conditions. 

For these predictions to come true, the RBA would need to keep the cash rate under 4%, inflation would need to drop to 5%, and unemployment would need to stay under 5%. If the RBA also chose to cut the cash rate in the second half of 2023, that could provide ideal conditions for the highest growth in property values.

However, if the cash rate, inflation and unemployment were to increase again in 2023, property prices could remain stagnant or decline further.  

Why could falling rates mean rising prices?

One of the reasons why many Australian properties experienced a value decline in 2022 was the impact of multiple cash rate hikes from the RBA to tackle high inflation. 

As lenders passed these hikes on to their customers by raising home loan interest rates, this reduced the maximum amount that many Australians were able to borrow; in some cases shrinking home buying budgets by as much as $214k. With these Australians now unable to afford to spend as much on property, more properties end up selling for less, resulting in lower average house price figures. 

In 2023 so far, we’ve experienced two more cash rate hikes, with the RBA bringing this benchmark rate up to 3.60%. However, two of the four big banks now believe we have reached the peak of the cash rate hikes, with falling rates to come. 

If interest rates were to pause and eventually drop, this could make it easier for some borrowers to afford the repayments on a larger home loan. With more buyers about to pay higher prices for properties, in time this could help push average property values in an area back up.

What do falling house prices mean for homeowners in 2023?

Falling prices may sound like a good thing for some Australians, such as first home buyers. However, because these falling prices are partly due to higher interest rates, it can still be challenging for first home buyers to afford a property, especially in popular areas of Australia’s capital cities.

Falling property prices can also lead to struggles for current homeowners and investors, whose properties may also decline in value. This could leave them with less equity available in their property to access, or even leave them in negative equity and unable to refinance, sometimes known as mortgage prison.

But if a fall in home loan interest rates were to result  in rising property values, this could lead to home owners seeing the equity in their property increase faster, on top of any repayments that help reduce their mortgage principal. This could make more options available in their personal finances, from refinancing their mortgage to taking out a home equity loan.   

What can you do about house prices and your property?

The best actions to take in response to changing property values and interest rates will depend on your household financial situation and personal goals. A few of the general tips you could consider include:

  1. Estimating your current equity – get a free property report to estimate your current home value.
  2. Comparing home loans for refinancing.
  3. Considering making extra repayments and/or using offset accounts to build mortgage buffers.
  4. Checking your credit score.
  5. Contacting a mortgage broker for advice that’s more specific to your situation.

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Product database updated 28 May, 2024

This article was reviewed by Personal Finance Editor Peter Terlato before it was published as part of RateCity's Fact Check process.