Home People Melbourne homes tipped for $135k wipe-out in next 18 months

Melbourne homes tipped for $135k wipe-out in next 18 months

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Melbourne house prices are tipped to fall up to $135,000 by the end of 2023.


An up to $135,000 wipe-out of Melbourne home values in the next 18 months will leave a growing group of buyers, including first-home buyers, owing more than their home is worth.

In the past month, Australia’s major banks have all predicted an at least 11 per cent hit to home prices across the city by the end of 2023.

PropTrack figures released this week show declines are already underway and the nation’s fourth biggest lender, ANZ, has warned of a 5 per cent cut by Christmas.

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AMP Capital chief economist Shane Oliver has also tipped a 5 per cent decline by the end of this year, and another 10 per cent across 2023 for a total fall of 15 per cent.

Mr Oliver warned a decline of that magnitude could leave some owners paying mortgages worth more than their home, and with Melbourne’s market largely flat in 2022, most who have bought this year would be at risk.

“I suspect it will probably be more the lower end where people, like first-home buyers, who have got in recently with low deposit levels have a greater degree of risk,” Mr Oliver said.

“And there is a risk that some buyers will have to sell at a loss and then you will have demand and supply driving prices down.”

Financial Services Council

Shane Oliver, Head of Investment Strategy and Chief Economist, AMP Capital. Picture: Jane Dempster/The Australian.


He warned the looming market fall was different from the city’s last correction in 2018-2019, when the nation’s prudential regulator ordered banks to raise borrowing costs for some new customers to help slow the market.

“This time around the Reserve Bank is raising interest rates so the question is whether that will be different to what happened in 2019 as it affects all borrowers, not just new borrowers,” Mr Oliver said.

Dollar figures based on $902,000 median Melbourne house value

He added a further warning that with house prices having far outpaced units during the market boom, they were at greater risk of falling more than units in the months ahead.

HOME PRICE PREDICTIONS

AMP Capital: down $135,500 (15%) by end of 2023

CBA: down $108,240 (12%) by end of 2023

Westpac: down $103,750 (11.5%) by end of 2023

NAB: down $103,750 (11.5%) by end of 2023

ANZ: down $99,220 (11%) by end of 2023

PropTrack (realestate.com.au): down $90,200 (10%) by end of 2023

On Wednesday, PropTrack estimated Melbourne’s median house value at $902,000 after declines of about 0.37 per cent so far in 2022.

If Mr Oliver’s 15 per cent decline prediction comes true such a home would lose $135,500.

PropTrack economic research executive manager Cameron Kusher said the research group, operated by realestate.com.au, were expecting a 10 per cent decline for Melbourne’s market by the end of 2023 — including a 3 per cent fall this year.

Mr Kusher said they didn’t believe interest rates would rise as fast or as much as the major lenders did, and added that with homes up 20.9 per cent since the Covid-19 pandemic reached Australia in March 2020 the impacts would be minimal.

“There are some who have bought recently and will be in negative equity, but a lot of them will just ride this out,” Mr Kusher said.

Cameron Kusher, PropTrack economic research executive manager.


Westpac chief economist Bill Evans said the nation’s second biggest lender was tipping a 14 per cent decline before Melbourne’s correction ended in mid 2024. The bulk of that decline will occur next year.

NAB chief economist Alan Oster said they expected Melbourne home values would lose about 1.5 per cent across this year, before dropping a further 10 per cent next year — though remaining well ahead of the 18 per cent growth recorded in 2021.

“So there are no alarm bells,” Mr Oster said.

While he doesn’t see these figures putting the market under stress, he did note it was possible people could “panic” as rates rise and home values fall — but there was no real cause for concern.

The CBA have declared Melbourne’s property market peaked earlier in the year, and would fall a total of 12 per cent by the end of 2023 from where it started the year in 2022.

The ANZ has Melbourne’s home price slated for a 5 per cent decline by the end of 2022, and a further 6 per cent across 2023.

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