Bank's worrying forecast for when housing prices will plummet
According to the lastest NAB forecast, property prices in Australia are expected to take a turn for the worst this year, before plunging by 11 percent by 2023.
After the Reserve Bank flagged that interest rates could be on the rise at some point this year, NAB drastically revised their initial outlook on property prices over the next two years.
In NAB's Residential Property Survey for the latest quarter, they have warned, “With our view on rate hikes coming forward, we now expect the turning point in property prices to occur in the second half of 2022.”
As a result, property is set to rise in value by just three percent this year, compared to a 22 percent boom in 2021 which had not been seen since the mid-1980s.
While 11 percent seems like a huge drop, the author of the report has reassured that it is a controlled drop.
“We see this as a relatively orderly decline,” the report noted.
“It is important to remember this correction comes after a very sharp run up in prices over the last year.”
As a result of the rising interest rate expectations, NAB brought forward its predictions of a correction.
“In terms of forecasts, we have brought forward the timing of the correction we expect in house prices to late-2022 as affordability constraints begin to bite and rising mortgage rates place downward pressure on prices,” the bank said.
“This would offset gains seen in early-2022, so that overall, prices end the year roughly flat. We see this trend continuing through 2023, ending the year around 10 per cent lower.”
Sydney and Melbourne will be hit hardest, dropping by nearly 12 percent each next year.
Hobart will face the lowest drop for 2023 at only 4 percent.
The combined capital city average was forecast to be a 9.4 percent decrease next year.
NAB have warned that interest rates could be on the rise as early as November this year.
Image credits: Getty Images