House price growth to slow by 2023 according to CBA

The forecast return of a rising cash rate is expected to slow the meteoric rise in property values around Australia, according to a new report from the Commonwealth Bank of Australia. However, improved wage growth combined with the return of international immigration should help prevent a house price freefall.

What may push down property prices?

The recent CBA analysis predicts that higher fixed rates, affordability constraints and macroprudential regulation should help to start slowing house price growth over the first half of next year.

But by November 2022, the Reserve Bank of Australia (RBA) may start to raise the national cash rate. Multiple increases are expected to bring the cash rate from its current record low of 0.1 per cent to 1.25 per cent by Q3 2023, according to CBA.

Home loan interest rates rising in accordance with the cash rate are expected to pump the brakes on new mortgage borrowing, as fewer Australians may be able to afford the higher repayments on the larger loans for properties that have experienced high price growth over the past few years. This could lead to property prices starting to decline.

What could push property prices back up?

However, don’t expect an outright price crash or a bursting of the property bubble. Part of the reason the RBA may choose to increase the cash rate is if Australia returns to full employment. Improving wage growth could help make it easier for some Australians to service a home loan.

Additionally, with covid restrictions expected to continue easing, the re-opening of international borders could lead to population growth, which could in turn increase demand for property.

With improved wages and rising demand from international arrivals partially offsetting rising interest rates, CBA forecasts that national dwelling prices should fall by around 10 per cent by the end of 2023.

Remember that the CBA report is not investment research – it is for informational purposes only, and does not account for your personal financial situation or objectives. Consider seeking financial advice before making any investment decisions. 

What does this mean for you?

Before you start changing your property plans, keep in mind that there’s no ‘best’ time to take out a home loan. Property is a long-term investment, whether you’re buying a home as an owner-occupier or buying an investment property.

While you can’t control Australia’s property markets, you can manage your own personal finances, and work out when you’re in a position to purchase property. Saving a deposit and working on improving your credit score can potentially help to put you in a stronger position so that when you decide to take the plunge, you can apply for a home loan with confidence.

RateCity can help you to check your borrowing power, keep track of any cash rate increases, and compare home loan offers. And if you need more help or personal financial advice, you can always contact a mortgage broker.

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