The roaring rally in Australian property prices will extend into 2022 before a 10 per cent drop in 2023 as climbing interest rates cool the market, Commonwealth Bank has warned.
The country’s largest bank anticipates home prices to rise 7 per cent next year, before “an orderly correction in home prices of around 10 per cent in 2023 as the RBA takes the cash rate to 1.25 per cent by Q3 2023,” according to Gareth Aird, head of Australian economists in CBA’s Global Economics and Market Research unit.
CBA anticipates the Reserve Bank will begin raising interest rates in November 2022, dragging the cash rate from the 0.1 per cent pandemic low set a year ago.
The prospect of rising rates will temper market exuberance and reduce the need for new macro-prudential rules to limit borrowing capacity among buyers, according to Mr Aird.
“A further tightening in macro‑prudential policy looks unlikely in our view given higher fixed mortgage rates will deliver APRA the desired cooling in the market,” he said.