Housing Market Predictions – Will It Crash or Boom?

Over the last couple of weeks, three of the four big banks have published their market predictions for 2022 and 2023, lending themselves to the idea that after two years of rapidly rising prices, the market will experience its biggest crash in decades.

But will this actually come to fruition?

While it’s beneficial to be guided by the predictions of the big four, there are several moving parts that affect the trajectory of housing outcomes, including:

  • Interest rates and credit availability
  • Stock levels and housing affordability
  • Labour market conditions and wages growth
  • Historical data

Currently, economists at CBA and NAB are estimating a 10% decrease in 2023, following a 3% rise in 2022, while the ANZ expects average capital-city housing prices to rise around 8% in 2022 and to decline around 6% in 2023.

However, when analysing the bigger picture, these forecasts paint quite an extreme outcome as it would be considered the biggest housing downturn in history, according to our research partner Dr. Andrew Wilson.

Since the late 1980s, Australia has experienced two national downturns that have ranged in severity from a -1.0 per cent peak to trough decline in 2015-16.

This was a temporary correction following the first round of credit tightening via APRA’s 10 per cent speed limit on investment lending, to the most recent -8.4 percent decline experienced during the 2017-19 downturn.

Once a market peaks, the typical trend demonstrates a period of decline in house values – yet the duration and severity of the decline is dependent on a broad range of both macro and micro factors outlined earlier.

In the current circumstance, cashed up households, low unemployment, falling housing supply and a lift in immigration all look to support the housing market through this period and limit the downturn in house prices.

As we move into 2022, the average capital-city housing prices are expecting gains of approx. 10% across Brisbane, Adelaide, Sydney, Hobart and Canberra where Melbourne, Perth and Darwin are set to experience more modest gains of around 5%.

While the RBA is expected to implement it’s first interest rate tightening later this year, a wide majority of industry experts do not expect a fall in house prices.

After a peak-to-trough rise in house prices of over 30% since late-2020, the forecasts put forward by the big-4 will have limited effects on residential construction or consumer spending, largely derived by the current high savings rates and increased interest rate buffers.



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