A major bank has forecast property prices could plunge by up to 15 per cent over this year and next as the current market downturn intensifies across Australia’s largest capital cities.
The modelling from ANZ bank indicated the falls would come off the back of higher interest rates, stretched affordability and federal government property tax changes included in the May budget.
In a report released Tuesday, ANZ economists Madeline Dunk and Adam Boyton said the market was slowing quicker than expected.
ANZ forecast capital city prices would fall by 4.3 per cent this calendar year and by 3.4 per cent in 2027.
2027 was expected to mark the trough in the cycle, with prices recovering over 2028.
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Auction clearance rates have been under 50 per cent for most of the last 10 weeks. Picture: Sarah Wilson
The cumulative falls in prices over the two-year period would be 10.6 per cent, measured from peak to trough, ANZ revealed.
Sydney prices were forecast to fall by a much larger margin, declining by an average of 14.5 per cent from its peak earlier this year.
Melbourne prices were expected to fall by an average of 12.8 per cent from their peak.
Both cities were expected to bounce back in 2028 with growth of about 5 per cent – largely due to anticipated interest rate cuts in the second half of 2027.
Price drops were expected to be smaller in Brisbane, Adelaide and Perth despite these cities having the fastest rises in prices over recent years, with Perth and Brisbane prices both doubling on 2021 levels.
Adelaide prices were forecast to drop 9.8 per cent, Brisbane by 7.9 per cent and Perth by 5.2 per cent.
Veteran auctioneer Tom Panos said conditions were the worst he had seen since the 1990s. Picture: Richard Dobson
“It is clear the combination of restrictive interest rates, recent tax policy changes and global uncertainty have dampened sentiment in the market,” ANZ told media.
A key sign of weakness in the market was auction clearance rates well below 50 per cent in major markets like Sydney and Melbourne.
Clearance rates below 50 per cent have historically correlated with price falls and are widely considered as the sign of a “buyer’s market” within the real estate industry.
ANZ noted that a general shortage of housing would insulate most markets from larger price falls.
ANZ Economist Madeline Dunk pointed in the report to a market slowing faster than expected.
“Given the broader supply backdrop, and the capacity constraints in the construction sector, we think it is hard to see housing prices falling for an extended period,” ANZ economists said.
ANZ’s forecasts follow NAB modelling showing a 5 per cent fall in capital city prices this year, led by a circa 10 per cent drop in Sydney and Melbourne prices. CBA has forecast a 6 per cent fall in Sydney prices and a 7 per cent fall in Melbourne prices this year.