The cash rate is 3.1 per cent now,after eight consecutive rises last year,but theRBA has started to consider whether to halt sharp increases,which are beginning to bite.
Hassan said an end to rate hikes would mean the market would enter the second stage of its correction,but buyer demand would remain soft due to the weakening economy and still comparatively higher rates.
He did not expect prices to rebound until 2024,when he forecasts a 2 per cent rise off the back of rate cuts.
“The third phase is the recovery phase and that typically only happens once you have a clear signal that the next move in interest rates is down,” he said.
AMP Capital chief economist Dr Shane Oliver said if the cash rate halted at 3.1 per cent,as he suspects,there would still be further price declines to come.
“The rise in interest rates has reduced the capacity of a borrower…by about 25 per cent,whereas prices are down about 8 per cent. So,even if rates stop rising,there is still a significant work through of the impact of higher interest rates[to come],” he said.
This combined with Oliver’s expectations for a weaker jobs market and a potential rise in homes for sale next year — as some homeowners facing mortgage stress decide to sell — means he is forecasting a 15-20 per cent peak-to-trough decline.
He expects prices to fall a total of 20 per cent in Sydney,about 15 per cent in Melbourne and Brisbane,about 10 per cent in Adelaide,and 5 per cent or less in Darwin and Perth,which had far more subdued price growth during the boom.
“We’re probably looking at another 9 per cent fall[nationally] … to a low in the September quarter. I think the pace of decline will probably continue to slow,” he said.
“Then as the RBA signals it’s getting closer to rate cuts,which we’ll probably start to see later in the year… that should enable the property market to bottom out and start rising.”
The Commonwealth Bank’s head of Australian economics,Gareth Aird,also expects the market to hit its low around the September quarter,and has forecast a 15 per cent peak-to-trough fall,and a decline of up to 19 per cent in Sydney.
“We’re about halfway through that national forecast … but obviously,there are variations between the capital cities,” he said.
“On the east coast prices are correcting lower quickly,but Perth and Adelaide have been remarkably resilient so far…[but we expect] prices will be falling in all capital cities[this year].”
Aird said the very tight rental markets,rebounding immigration levels,and a tight labour market,were helping cushion price falls.
He has tipped the cash rate to peak at 3.35 per cent early this year,but did not expect more buyer activity to return until rate cuts were clearly on the horizon.
“Ultimately,what happens will be influenced by what the RBA does,but our expectation is that they don’t have much further to go,” he said.