The Commonwealth Bank expects the average house price in Perth to fall by 8% in 2023


Property prices in Perth are expected to fall by 8% next year, driven by interest rate hikes by the Reserve Bank of Australia.

New forecasts from the Commonwealth Bank on Thursday suggest that the RBA’s tightening will have a huge impact on gross domestic product and the broader economy.

The country’s biggest lender expects cuts of 50 basis points in the second half of next year after rates hit an expected high of 2.1% this year.

Australia’s economic chief Gareth Aird said that although no economic collapse is expected and talk of a recession is premature, growth would moderate “below trend”.

This would eventually lower inflation and the unemployment rate would rise towards the end of next year.

“The RBA seems very determined to bring the rate of inflation down quickly. But that will come at the expense of aggregate demand growth, particularly household consumption,” Mr Aird said.

He said the RBA now appeared to be “inflation fighters first and foremost”. His comments come a day after he told The West Australian that the RBA’s actions did not match his language.

“Their goal of ‘economic prosperity and the well-being of the Australian people’ has taken precedence over their desire to bring down the rate of inflation,” Mr Aird said on Thursday.

“We don’t think the RBA should fight wage growth by aggressively raising the cash rate…but at the end of the day, whatever we think, it’s about what they do.”

Nationally, the ABC expects home prices to fall and estimates that prices hit a cyclical high in April. In Sydney, Melbourne and Canberra – the most expensive cities in the country – prices are already falling.

Commonwealth Bank is now predicting annual declines of 6% nationwide for this year and up to 11% in Sydney and 10% in Melbourne. He expects prices in Perth to rise 2% in 2022 and 6% in Brisbane and Adelaide.

For next year, he expects falls across the board: up to 11% in Adelaide, 10% in Brisbane and 9% in Hobart, Darwin and Canberra. Perth and Melbourne are expected to lose 8% and Sydney 7%.

It comes after record growth in 2021 of 21% nationally – 13% in Perth and up to 27% in Brisbane. The predicted drop does not erase the average gains seen last year, meaning buyers hoping for lower prices could miss out next year.

Elsewhere, the Commonwealth Bank expects real consumer spending to be significantly reduced due to higher interest rates.

“Higher-than-expected energy prices will put downward pressure on real consumer spending, particularly discretionary consumption by lower-income households,” Aird said.

“Consumer confidence is already in deeply pessimistic territory and we don’t see that picture turning around any time soon.”

He said low unemployment would continue for some time and would help push up wages for workers with individual agreements.

Mr Aird urged governments to use political leverage to help address gas and electricity supply problems, which are exploding across the rest of the country and putting enormous pressure on household budgets.

He said it was not the RBA’s only job to fight inflation.

“The cash rate is a very blunt tool for addressing some of the supply issues in national and global economies right now that are contributing to higher inflation,” Aird said.


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