On Friday Westpac economists forecast property prices could fall 14% from late 2022 through 2024.

This is more bearish than major bank counterparts NAB and CBA, both forecasting 10% price falls through 2023.

The bank with the most recent tip, Westpac, said the outlook on interest rates was a major driver of the negative forecasts.

Earlier in the year, bank economists forecast the RBA to start hiking the cash rate from August - it also raised its expectation for the 'terminal' cash rate to sit at 1.75% in 2024.

This implies one 15 basis point hike, followed by six 'regular' 25 basis point hikes.

Making money 'more expensive' is one lever the RBA can pull to keep inflation under control.

"Housing will be ‘collateral’ damage in the RBA’s efforts to keep inflation on target over the medium term," Westpac economists said.

"Two thirds of consumers now expect mortgage interest rates to rise over the next 12 months, up from 55% in January and the highest since 2011."

Late last year, the prudential regulator increased the mortgage serviceability buffer, estimated to affect the average home buyer's borrowing power by 5%.

This is just the start of the 'tightening cycle' according to Westpac economists. 

"Prices at the end of 2024 will be on a par with their level in April last year," they said.

"By the end of 2024 the mix of lower prices and higher incomes will have more than offset the effect of higher rates restoring affordability to more normal levels for most markets.

"Housing markets will need to adjust to the prospect that, in the absence of some major shock like Covid or the GFC, rates are unlikely to ease in the foreseeable future."

From April 2020 to June 2021, Westpac forecast a 5% housing market dip, but in that time prices appreciated 15% nationally.


'Lemon suckers'

Propertyology's head of research Simon Pressley has long been critical of big banks' property price forecasts. 

"Property predictions from banks and economists have gone from being laughable to embarrassing," Mr Pressley told Savings.com.au.

"They obsess over one or two negative factors that act as a drag on market performance. There are dragging factors on markets every single year.

"Damn lemon suckers."

Instead, Mr Pressley pointed to the positive-growth forces in the property market, including high savings buffers, large offset account balances, the economy nearing full employment, and low housing supply.

The average Australian mortgagee is also four years ahead on their home loan.

"The RBA has been crystal clear that sustained wage growth will occur before interest rates rise," Mr Pressley said.

"Interest rate rises are inevitable, but they need to increase five-times just to get back to where they were three-years ago. Mortgage holders coped fine then and they will again now."

"There is over $100 billion cash in mortgage offsets and redraw accounts."


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured 4.6 Star Customer Ratings
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  • Unlimited free redraw
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5.99% p.a.
5.90% p.a.
Principal & Interest
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  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
6.09% p.a.
6.11% p.a.
Principal & Interest
Featured Unlimited Redraws
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  • Unlimited additional repayments free of charge
  • Redraw freely - Access your additional payments when you need them
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Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

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Simpsons image via Know Your Meme

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