According to the PropTrack Property Market Outlook Report, national housing prices are expected to decline by up to 10% by the end of 2023.

This comes following a 2.3% nationwide drop in 2022, which was largely linked to the RBA’s most aggressive monetary tightening cycle in 28 years.

Prices are forecasted to decline across all capital cities in 2023, with the largest falls expected in Sydney, 8% to 11%; Brisbane, 8% to 11%; Canberra, 8% to 11%; Melbourne, 7% to -10%; and Hobart, 7% to 10%.

Despite becoming one of the standout property markets during the property boom, Brisbane has set a new benchmark for the largest and fastest property price decline on record, falling 10.9% from its June 2022 peak.

Meanwhile, the capital cities expected to hold up stronger than their counterparts are Adelaide (-3% to -6%), Darwin (-3% to -6%), and Perth (-5% to -8%).

These forecasts are based on the assumption the cash rate will rise a further 50 basis points from its December 2022 level (3.10%).

PropTrack Director of Economic Research Cameron Kusher said interest rates, propelled by soaring inflation, remain the main driver of declining property prices.

“At the beginning of May 2022, official interest rates were sitting at 0.1%. By the end of 2022, the cash rate had increased to 3.1% –the highest it has been since November 2012,” Mr Kusher said.

“We’re expecting prices to decline by up to 10% nationally in 2023, with greater falls expected in the larger capital cities.

“Demand for regional properties is also likely to slow and given prices have seen stronger growth in these areas than within the capital cities, we expect to see price falls in these markets too.”

Pandemic gains nearly wiped out

If the PropTrack forecast holds true, the property market would see a cumulative decline of close to 15% since the start of the downturn. 

However percentages on the way up are different to those on the way down.

If a property worth $1 million gained 30% in three years, that would result in a $1.3 million value; if that were to lose 15%, that figure would be $1.105 million, or a net gain of 10.5%. 

This means that property prices don't need to fall by an equivalent percentage to wipe-out pandemic-era gains.

AMP Chief Economist Shane Oliver expects average property prices to fall further out to the September quarter as rate hikes continue to flow through and economic conditions deteriorate.

“Since April, the amount an average new buyer can afford to pay has dropped by roughly 27% from around $600,000 to around $440,000,” Mr Oliver explained.

“This demand side impact has been the key driver of home price falls so far, but suggests there is more to go even if the RBA stops raising rates.

“We continue to expect national home prices will have a top to bottom fall of 15 to 20%.”

The big-four banks echoed similar sentiments, forecasting house prices to fall by 15-20% by the end of 2023. 

While house price falls over the past year have been steep, national property prices would remain 18% above pre-pandemic levels.

With the first interest rate hike of 2023 expected to be delivered today, all signs are pointing to another 25 basis point increase, likely  eroding house values and borrowing capacity further.

While some economists tip it to be the last in the cycle, others expect a peak cash rate as high as 4.10%.

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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
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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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