The fall in inflation-adjusted terms could be the largest to hit the Australian property market since the early 1980s. | By Shane Wright swrighteconomy
Property prices could fall as much as 20 per cent by the end of 2024, hitting consumers and wiping hundreds of billions of dollars worth of wealth from households, internal research by the Reserve Bank has found.
The bank has increased interest rates at its past six meetings, taking the official cash rate from 0.1 per cent in early May to 2.6 per cent. It is expected to lift rates at its last two meetings of the year, leaving the cash rate at 3.1 per cent before Christmas. The documents show the bank expects prices to fall nationally by 11 per cent by the middle of next year before stabilising. Prices in Sydney and Melbourne are likely to fall by 1.5 per cent a month through the rest of 2022.
Household consumption is the largest part of the national economy, accounting for more than 60 per cent of GDP. Falling house prices would contribute to a rise in home construction business insolvencies, Reserve Bank documents suggest.The documents also show the bank expects capacity constraints, which have hit the housing construction sector, to continue at least into the middle of next year. There is a growing risk higher interest rates will also drive more builders to the wall.