Will Average House Prices Fall over The Next 18 Months?
Borrowers should brace for a 15 per cent fall in home prices as interest rates rise, warns RBA
"Estimates using a model of the housing market that takes into account historical relationships between interest rates and both demand and supply factors suggest that a 200-basis-point increase in interest rates from current levels would lower real housing prices by around 15 per cent over a two-year period," the FSR noted.
https://www.abc.net.au/news/2022-04-08/reserve-bank-financia…
Why Aussie house prices will fall circa 20% when the RBA hikes interest rates
When you write about bricks and mortar, it inevitably attracts a lot of hyperbolic attention: you tend to be typecast as a preternatural 'bull' or 'bear'. To be clear, we are neither: our task is to simply try to accurately anticipate what will unfold. After explaining that Aussie house prices would have to correct by 15% to 25% if—-heaven forbid—-the RBA ever lifted its target cash rate by 100 basis points or more, some readers responded that they had never seen us predict price falls before….
…Assuming rates increase relatively promptly over, say, a 12 month period, we would expect national home values to decline by 15% to 25%. It is possible that the adjustment is smaller if the RBA moves more slowly and the value of residential real estate mean-reverts partly via household income growth over the effluxion of time. But our central case would be a circa 20 per cent decline after the first 100 basis points of hikes.
https://www.livewiremarkets.com/wires/why-aussie-house-price…
Financial market consensus (happy to link proof), including every single one of the big four banks, is for the first central bank interest rate rise to occur in the first week of June (not May because of the election, for fear of appearance of impropriety, which is a BS reason personally)
I'm interested to hear what people's opinions are & if the awareness of pending interest rate rises causes house prices to fall PRIOR to the actual rise (& hence the actual hit to mortgage repayments). FYI, fixed term interest rates by retail banks have already been increased.
Its pretty clear that many people have not been through a property slump. Which is fair enough since it last occured in the early 1990s (although, weirdly, the price decrease then was only marginally higher than the slump in 2018. the difference being it took 10 years to recover in the 1990s and about 3 weeks in 2019…)
What happens in most property slumps is not a 40% crash, its a slow 10% or so drop following by years of flatlining with less than inflation growth (so effectively a slight reduction).