Property Market to hit bottom in 2023

A stabilisation in cash rate changes by early 2023 will likely see the market bottom out, a new market report for brokers from NAB has suggested.

It suggests that while a number of risks could cloud the economic outlook (particularly international and geopolitical events), Australia’s property market will likely experience less volatility moving forward.

According to NAB’s chief economist Mr Oster, slowing global growth, high inflation, low unemployment and rising rates mean that while Australia’s economy is “delicately poised” heading into 2023, it is not likely to enter a recession.

In the report, Mr Oster forecast that the official cash rate will likely reach “at least 3.10 per cent by the end of 2022 or early 2023”, with the Reserve Bank of Australia expected to proceed “much more cautiously as it assesses the impacts on households and businesses, and the shifting global economic environment”.

The last two years had resulted in extremes in economic activity (including a recession in 2020, which was quickly followed by the strongest year-on-year growth in GDP for a decade), where property prices had risen by 28.6 per cent.

CoreLogic’s national Home Value Index data that showed that home values had declined 4.8 per cent in the five months to September 2022, with the decline becoming more geographically widespread each month.

NAB’s economics team forecast that combined capital city home values could drop by around 20 per cent from their peak in April 2022 — taking house prices back to September 2020 levels by April 2023.

There are signals that we could already be getting a stabilising of the cash rate by early next year. And obviously that is going to be the time where this market, this downturn finds its floor. So, in that sense, it’ll probably be shorter than a lot of those historic declines.

CoreLogic has outlined how median values could change over different scenarios — revealing that Sydney and Melbourne would be hardest hit by double-digit drops.

Even a 20 per cent decline in home values across Adelaide and Brisbane — where prices have escalated sharply over the last two years — would only take home values back to price levels in mid-2021