SYDNEY, November 23 (Xinhua) — The Commonwealth Bank of Australia (CBA), Australia’s largest retail bank, predicts the country’s hot property market will fall by as much as 10 percent in 2023.
“The Australian housing market is in the twilight of an incredible boom fueled by record low mortgage rates,” Gareth Aird, the CBA’s head of Australian economics, said on Monday.
The report, based on data from property analytics firm CoreLogic, estimated that Australia’s property market would grow by 22 percent from 2021, with that annual growth falling to just 7 percent in 2022, curtailing in the second half of that year.
A 10 percent decline is predicted in 2023, led by the capitals of Sydney, Melbourne, Canberra and Hobart, the same cities experiencing the highest levels of illegal growth.
Aird attributed the projected decline to two factors, including rising borrowing rates and stagnant wage growth set by the Reserve Bank of Australia (RBA).
A historic report from CoreLogic showed that house prices in Australia have risen three times faster than wages over the past 40 years.
This has not been more evident than during the pandemic, according to the Australian Bureau of Statistics (ABS), which has noted that through September 2021 wages in Australia had increased by only 2.2 percent, or 10 times less than the housing market. .
This is coupled with projections from the RBA that it will increase cash loans by late 2023. To this end, private banks have already begun to increase lending rates in anticipation of further tightening the purchasing power of home buyers.
Despite this impending “twilight”, Aird argued that the drop would be a correction, not a crash.
“A cooling market is not the same as a falling market. Prices are still rising at a reasonable rate,” he said.