Property price rollercoaster – national house prices could drop $150K by 2023

The national median house price could drop by $150,518 by the end of next year, according to RateCity.com.au analysis of ANZ’s new property price forecasts.

Sydney’s median house price is set to fall even further, with an estimated drop of $204,543 between July 2022 and the end of 2023, taking it to $1,141,650.

In Melbourne, the median house price could fall by $128,141 from July 2022 to the end of 2023 to $836,809, while prices could drop by more than $160,000 in Brisbane and Adelaide by the end of next year.

These figures are based on CoreLogic’s adjusted median values from December 2021, applying ANZ’s annual forecast.

Median house prices - how far could they fall by the end of 2023?

Source: RateCity.com.au. ANZ property price forecasts, CoreLogic index-adjusted median values, 31 December 2021 and 31 July 2022.

Prices forecasted to rebound in 2024

While steep price drops are expected between now and the end of 2023, ANZ is forecasting property price rises in all capital cities in 2024.

Analysis from RateCity.com.au shows property prices across the capital cities will still be substantially lower in 2024, than they are today.

Median house prices – prices to rebound in 2024

Source: RateCity.com.au. ANZ property price forecasts, CoreLogic index-adjusted median values, 31 December 2021 and 31 July 2022.

Falling property prices could force some borrowers into ‘mortgage prison’

People who don’t own a decent portion of their property may find they can’t refinance for several years, putting them in ‘mortgage prison’.

This is because borrowers need to own at least 20 per cent of their property in order to refinance, otherwise their new lender will hit them with costly lenders’ mortgage insurance, which could negate any potential savings. Borrowers in negative equity are likely to find lenders aren’t willing to take them on at all.

First home buyers who took advantage of the federal government’s low deposit scheme, are among the borrowers most likely to be impacted.

RateCity.com.au analysis shows if someone bought a median-priced house in Sydney in December 2021 with a 10 per cent deposit, they could owe the bank 8 per cent more than their home is worth by the end of 2023, if ANZ’s forecasts are realised.

This is despite the fact they would have been paying down their debt for two years.

By the end of 2024, they could owe the bank almost exactly as much as the property will be worth.

Sydney: what percentage of your property you own

Source: RateCity.com.au. CoreLogic, ANZ.

Borrowers in Melbourne may also find themselves in a similar situation. If they had a 10 per cent deposit when they purchased in December 2021, they could owe the bank 4 per cent more than their home is worth by the end of next year.

Melbourne: what percentage of your property you own

Source: RateCity.com.au. CoreLogic, ANZ.

RateCity.com.au research director, Sally Tindall, said: “This is a classic case of what goes up, can come down. However, the drops aren’t likely to come close to the huge property prices gains over the last couple of years.”

“As interest rates rise, people are finding they can borrow less, because they have to pay more of their monthly salary to the bank in interest,” she said.

“This is applying a handbrake to Australia’s property market, and with the RBA poised to potentially hike by another 1 to 1.5 percentage points, the drops are likely to keep on coming for the remainder of this year and into 2023.

“Falling prices might finally provide some first home buyers with a window in, but it won’t be an easy one to climb through.

“Would-be buyers now have to pay significantly higher interest rates on prices that are still likely to be well above pre-COVID levels.

“ANZ expects the market to turn back around in 2024, however, an increase in demand from people on the hunt for a good deal could turn around the market sooner than expected.

“Investors could also come back to the market early if rents continue to rise at the same time property prices fall.

“People who bought at the peak shouldn’t let news of property price drops get them down. What’s important is for them to keep their head down and their mortgage repayments up.

“Increasing numbers of people will find themselves trapped in mortgage prison, stuck with their current lender, until they can build their equity above 20 per cent.

“Being in mortgage prison isn’t a life sentence, but based on current property forecasts, it could take several years to get out.

“If there’s a chance your equity could fall below 20 per cent in coming months, do a health check on your mortgage now, and consider your options before it's too late,” she said.

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