Australian house prices will rise in 2023 if the Reserve Bank pauses rate rises and inflation drops, according to a new report from property analysis firm SQM Research.
SQM Research’s Housing Boom and Bust Report for 2023 forecasts capital city house prices will rise between 3 and 7 per cent.
The report’s “base case” forecast hinges on the RBA not hiking the cash rate above 4 per cent, inflation dropping to 5 per cent, and unemployment staying below 5 per cent.
“If the [cash rate] target rate stays below 4 per cent, then it is unlikely we will have a flood of forced sales in the housing market,” SQM managing director Louis Christopher said.
“There is, of course, a risk the RBA may need to go further. If they do, then the risks of a hard landing in the economy do substantially rise and, thus, a hard landing in the housing market would also occur.”
The cash rate is currently 2.85 per cent, annual inflation is 7.3 per cent and set to hit 8 per cent by the end of the year, while unemployment is at 3.4 per cent.
Interest rates affect how much people can borrow, which in turn influences house prices.
The report’s base case scenario forecasts Sydney will see the biggest lift in property values of between 5 and 9 per cent.
Mr Christopher said overseas migration, workers returning to the office, a shortage of rental accommodation and the New South Wales government’s changes to stamp duty and land tax would drive the recovery in Sydney.
Perth house prices are forecast to jump up to 8 per cent on the back of strong rises in employment and interstate migration.
In Melbourne and Brisbane the pace of growth is expected to be slower at between 1 per cent and 5 per cent.
Adelaide’s property market could stay flat or record growth of up to 5 per cent.
However, in Hobart property values could fall 1 per cent or increase up to 3 per cent. Canberra property values could drop 3 per cent or rise up to 2 per cent.
Darwin is expected to be the weakest housing market next year, with SQM forecasting falls of up to 5 per cent.
Source: Will house prices go up in 2023? The answer largely depends on interest rates, Rhiana Whitson for ABC News