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Perth house prices could drop $88,556 by the end of next year which would see the median house price drop back below $500,000.
The latest property price forecast from ANZ economists predicted house prices nationally were expected to fall between 15 and 20 per cent by the end of next year in response to higher official interest rates, before starting to recover in 2024.
Perth property prices could drop by 13 per cent the end of 2023.Credit:Bloomberg
In WA house prices are tipped to fall 13 per cent in 2023, before rebounding slightly in 2024.
Senior ANZ economists Felicity Emmett and Adelaide Timbrell said the steep increase in mortgage rates since the Reserve Bank started tightening monetary policy in May would weigh on house prices.
They said the biggest factor driving the fall in prices was the reduced borrowing capacity of potential buyers caused by the lift in official rates, which the ANZ is anticipating will peak at 3.35 per cent early next year.
“Total repayments are also set to rise sharply, with over half of payments on fixed-rate loans rising by over 40 per cent once the fixed rate expires,” they said.
“Despite these large rises, we know that debt is concentrated among high-income households who are more likely than others to have large savings buffers and more income to cover inflation and interest rate changes.”
RateCity.com.au research director Sally Tindall said, although the property market in Perth has risen by more than 4 per cent already this year, prices could start dropping within the next few months, as rising interest rates start to shrink people’s budgets.
“By the end of next year, the median priced house in Perth could drop back below $500,000, that’s almost $90,000 less than now,” she said.
Tindall said falling prices could provide first homebuyers with a window into the property market but warned it would not be an easy one to climb through.
“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.
“Would-be buyers now have to pay significantly higher interest rates on prices that are still likely to be well above pre-COVID levels.”
Tindall said any drop in house prices should be short-lived with ANZ expecting Perth property prices to pick back up in 2024.
“This could come earlier if demand increases from a rise in immigration and renewed interest from investors seeking to capitalise on a tight rental market,” she said.
The RBA has increased official interest rates by 1.75 percentage points since May as it seeks to reduce inflation pressures across the economy.
Commonwealth Bank’s head of Australian economics, Gareth Aird, said the minutes of the RBA’s August meeting suggested the bank was getting close to the point at which it would pause its increase in interest rates.
He said it was still likely the RBA would use its September meeting to lift rates by another half percentage point.
PropTrack director of economic research and author of the report Cameron Kusher said rising interest rates were the driving force behind their prediction that Perth house prices could drop by two per cent by the end of 2023.
“We weren’t expecting the Reserve Bank to start raising interest rates until early 2023, so while there were some signs that house price growth was slowing at the start of the year, their rapid moves have escalated things,” he said.
But Perth property analyst Ryan Thompson was more upbeat about the performance of the market over the coming year.
“The worst-case scenario is a plateau of prices and the best case is a 5 per cent growth between now and winter next year,” he said.
“Demand is still very high for properties in Perth and now that rental returns have started to climb investors will start coming back into the market.”
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