ANZ predicts massive drop in housing prices through 2023

One of Australia's big four banks has predicted a major shift in the property market over the next year and a half.

ANZ said it foresaw a 20 per cent fall in housing prices across Australia's capital cities, before a "modest recovery" in 2024 as mortgage rates fell.

It comes on the back of strong indications the Reserve Bank of Australia will continue to push up interest rates in an attempt to quash rising inflation.

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The RBA hiked rates for a fourth consecutive month in August, to 1.85 per cent.

ANZ said RBA's board minutes from yesterday indicated another jump of 50 basis points was likely in September.

The housing market has already started to dip, according to Domain's June 2022 Quarterly House Price Report, released late last month.

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The report found the median house price across Australia's capitals had dipped to $1.065 million, with prices now 0.9 per cent below the previous quarter's record high. 

Similarly, annual growth experienced its biggest slow down since March 2021, at 10.9 per cent, according to the Domain report.

Over the most recent quarter, Domain data shows the slow down is now spreading across the capital cities for the first time, with the annual pace of both house and unit price growth easing across all combined capitals, apart from units in Adelaide.

Unit prices outperformed houses for the first time in three years.

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And any fall in housing prices is likely to be met by increases on mortgage payments as the RBA continues to hike the cash rate.

For the average borrower with a $500,000 loan and 25 years remaining, August's increase will result in a $140 a month increase - or $472 since the RBA began lifting rates in May 2022.

For those with bigger loans, the repayment jumps are equally stark.

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A person with a $750,000 loan currently faces a monthly increase of $211 (up $708 a month since May) while those with a $1 million loan are facing a monthly increase of $281 (or an eye-watering $944 a month increase since May).

And the financial markets are predicting the RBA won't take its foot off the accelerator until the interest rates reach three per cent.

So far, the big four banks have all passed the rate hikes on to customers.