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RBA Fears 20% Real House Price Drop


Internal documents released under the Freedom of Information Act showed the RBA estimated in July that real house prices could fall 20% from their peak in around two years reflecting higher rates and a drop in sentiment. They noted that this would be the largest correction since 1982. House prices were now expected “to decline over the next few years”.

  • It is worth noting that prices rose 25% from their September 2020 trough to the peak in April this year. But falling house prices can weigh on consumer confidence and expenditure through the wealth effect channel. There is also the impact they can have on the residential construction sector. As a result, the RBA noted its concern regarding the uncertainty surrounding the impact of tightening on house prices.
  • In the August summary of Preliminary Domestic Activity Forecasts, the RBA assumed house prices would be 11% below their peak by mid-2023. The CoreLogic series is currently 5.5% below the peak. They assume that the main driver of lower household wealth going forward would be the fall in house prices.
  • The RBA’s housing team also observe that the there was a “definite slowing of momentum and a downturn occurring across the nation” in housing.
  • Rents were expected to continue to rise and the subsequent rise in rental yields could bring investors into the market and provide some support for house prices.
CoreLogic 5-capital city house prices y/y%

Source: MNI - Market News/Refinitiv

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