House values facing $100,000 drop, bank predicts

Major banks are all predicting housing prices to fall around the country in a national slowing of the property market.

The federal budget’s changes to negative gearing and capital gains tax, along with still-high interest rates, have already helped push clearances down, with Cotality yesterday reporting a clearance rate of 47 per cent in capital cities last week.

That’s the lowest it’s been since the COVID-19 pandemic.

Now, major banks are predicting house prices will follow the plunge, with some forecasting a $100,000 drop on house values in Sydney and Melbourne.

NAB predicts a 6 per cent drop in Sydney and a 7 per cent drop in Melbourne for the rest of the year, as part of a national 2 per cent drop.

According to some modelling, this could knock just over $100,000 off the median value of a Sydney house of about $1.75 million.

AMP and the Commonwealth Bank are both predicting the housing market to fall five per cent nationally into early 2027.

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ANZ is predicting a five per cent fall through to next year’s end.

AMP deputy chief economist Diana Mousina said the fall in prices was not the sign of a weakened economy, but a corrective to runaway housing values.

“The expected slowing in home prices is not enough in itself to generate a serious economic downturn in Australia,” she said.

“Lower wealth growth will limit household spending but this is also helpful to get inflation to be a bit lower. It could make the RBA’s job a little easier.”

Prime Minister Anthony Albanese and Treasurer Jim Chalmers have struggled to sell their tax reforms, taking the line that it will help more first-home buyers enter the market.

That’s despite recent polling indicating most Australians are in favour of lower housing prices.