NAB: House Price Growth Expected to Slow to Just 3% in 2022

Economists from the National Australia Bank (NAB) have revised their house price predictions, and they are now expecting prices to increase by roughly 3% in 2022 and to fall by roughly 10% in 2023. The change reflects the impact of affordability issues and increasing mortgage rates putting downward pressure on prices.

This trend should be obvious across the capital cities, though more significant drops are expected in Sydney and Melbourne and less significant declines in Brisbane and Adelaide.

NAB also forecasts the first rate increase from the Reserve Bank of Australia to happen in November, with a steady succession of increases occurring through 2023 and 2024.

According to the latest NAB Residential Property Survey report, average dwelling prices in capital cities are expected to rise by 2.7% in 2022, down from the original forecast of 4.9%.

AMP Capital economists also amended their dwelling prices forecast, from 5% to 3%, and brought forward their forecast for the first rate increase from November to August. Property prices are expected to peak around the September quarter and then decline in 2023.

PropTrack economists forecast combined capital city home prices to increase by 6-9% this year. Though prices are expected to continue to climb, the rate of price growth will slow.

The price growth is attributed to historic low interest rates, economic stimulus and controls on how people can spend their money.

Commonwealth Bank (CBA) economists also forecast the pace of lending for housing and house price increases to slow in 2022. It had predicted an increase in prices of 7% in 2022, before a 10% drop in 2023.

With its revised RBA call of a rate increase in August 2022 (from November), an earlier peak is expected for home prices and a smaller increase this year.

RBA governor Philip Lowe admitted that interest rates may increase later this year. It is also possible that the first gain in rates could happen in a year or so.

The RBA’s latest Statement on Monetary Policy indicated that dwelling prices rose by 22.4% across Australia last year. Housing price gain has slowed in recent months in Sydney, Melbourne and Perth, from high levels recorded in early 2021.

Nonetheless, prices have continued to rise in certain minor capital cities and regional areas like Newcastle, though this does depend on the ‘grade’ or quality of the property and of course the location.