Going, going, gone – are Australia’s biggest property bubbles finally about to burst?

The median property price in Sydney could drop by $146,651 by the end of next year, according to RateCity.com.au analysis of CBA’s new housing market forecasts.

Property prices in Australia’s two biggest capitals, Sydney and Melbourne, are now expected to drop annually by 3 per cent in 2022 and 9 per cent the following year, according to an updated forecast released yesterday from Australia’s biggest bank.

The news follows on from data out from CoreLogic recording Sydney’s first drop in dwelling values in almost a year and a half.

If CBA’s forecasts are realised, the median dwelling price in Sydney could drop by an estimated $146,651 by the end of 2023 to $969,568 – under the $1 million mark.

If house prices follow the same trajectory as the bank’s dwelling forecasts, the median house in Sydney could drop by almost $200,000 in less than two years.

Note: calculations are based on CBA’s annual forecasts using the median property values from CoreLogic as of 31 December 2021, however, the change is calculated from CoreLogic’s current median prices (28 Feb 2022) to end December 2023.

DWELLINGS: price forecasts

See notes below.

HOUSES: price forecasts

Based on CBA’s dwelling price projections

Sources: CBA, CoreLogic. Notes: based on property price forecasts for dwellings, applied to house prices from 31 Dec 2021 from CoreLogic, published 4 Jan 2022. Today’s median values are from CoreLogic from 28 Feb 2022, released 1 March 2022.  *Australia is combined capital cities.

RateCity.com.au research director, Sally Tindall, said property prices in Sydney and Melbourne were already wavering on the back of higher fixed rates, stricter serviceability tests and a fear of buying at the peak.

“This could be the beginning of the end for the current property price peak in Australia’s two biggest cities,” she said.

“If CBA forecasts are realised, the median dwelling price in Sydney could fall by almost $150,000 by the end of 2023.

“If house prices follow the same trajectory, we could be looking at drops of almost $200,000 for a median-priced house in Australia’s largest city from today to the end of 2023.

“People might not like the idea of losing equity in their home over the next couple of years, but it’s worth looking at the bigger picture. Any property price drops will be coming off the back of monumental gains across the country over the last year and a half, which sent most homeowners’ equity skyrocketing.

“While falling property prices can be stressful for anyone buying at or near the peak, if they keep their head down and their mortgage repayments up, they should be able to ride out any dips.

“Property price drops will provide a reprieve for people hoping to get into one of Australia’s many overheated property markets, however, would-be first home buyers should crunch the numbers before they pop the champagne.

“If property prices fall on the back of rising rates, buyers might not need to stump up as much for a deposit. They will, however, need to make higher monthly repayments, which means they won’t be able to borrow as much from the bank.

“First home buyers should think carefully about overextending themselves in a market where rates are set to rise and prices are forecast to fall. Make sure you have a buffer to ride out any bumps,” she said.

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