Commonwealth Bank forecasts 13 per cent fall in Sydney prices
Australian mortgage holders are facing fresh anxiety after Commonwealth Bank forecast a "deeper correction" in home values, warning that national prices could fall by up to nine per cent, with capital cities averaging a ten per cent decline. Sydney is expected to be hit hardest, with CommBank predicting a 13 per cent peak-to-trough drop that would strip roughly $211,000 from median house prices, while economists said the downturn has arrived faster and more widely than they had anticipated.
Sydney dwelling values fell 1.4 per cent in August and now sit 7.1 per cent below their February peak, while Melbourne is down 6.5 per cent from its high, with Brisbane, Adelaide and Perth also recording consecutive monthly falls. Analysis from comparison site Canstar, based on CommBank Research, suggests Melbourne could lose $119,000 from its median price, Brisbane $97,000, and Perth and Adelaide could both fall below the $1 million mark. The forecasts coincide with expectations of a fourth Reserve Bank of Australia rate rise this year, potentially taking the cash rate to 4.60 per cent by November and adding around $92 a month to average mortgage repayments, with NAB warning of an even steeper rise to 4.85 per cent.
- CommBank predicts up to 13% house price fall, hitting Sydney hardest
- Sydney medians could drop about $211,000; other cities also affected
- Comes amid expected RBA rate rise pushing up mortgage repayments
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Australians who have a mortgage, or are hoping to buy a home, are watching house prices closely because of warnings that values could fall sharply over the coming months. Commonwealth Bank, one of the country's largest lenders, regularly publishes forecasts on where property prices are heading, and these are widely used by economists, other banks and the media to gauge the health of the housing market. Sydney, Australia's most expensive city for housing, is central to this story because it stands to see the steepest falls.
House prices are closely tied to interest rates, which are set by the Reserve Bank of Australia (RBA), the country's central bank. When the RBA raises its cash rate, banks typically pass this on through higher mortgage repayments, which can cool demand for housing and push prices down. Prices in Sydney, Melbourne and other major cities have already been easing for several months, which is the backdrop against which these new forecasts are being made.
This matters because housing is central to household wealth in Australia, where a large share of people own property or aspire to. Falling prices can ease the path to ownership for buyers but reduce the paper wealth of existing owners, while rising mortgage costs affect household budgets regardless of price movements. Banks such as Commonwealth Bank and NAB, along with the RBA's rate decisions, are the key players shaping how this situation develops.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Advocates of the current approach argue that a substantial correction is a necessary and overdue rebalancing after years of unsustainable price growth that had locked younger buyers, key workers and low-income households out of the market. They contend that the Reserve Bank's rate rises are essential to bring inflation under control, and that some short-term pain for existing owners is a reasonable price for restoring long-term affordability, financial stability and a healthier balance between housing as a home and housing as an investment.
The case against
Others argue that the scale and speed of the forecast falls, combined with successive rate rises, risk inflicting serious hardship on recent buyers and highly leveraged households, potentially pushing some into negative equity or forced sales. They contend that policymakers should be more cautious about tightening further, since sharp declines can destabilise consumer confidence and the broader economy, and that framing the downturn simply as a correction understates the real financial stress facing ordinary mortgage holders who bought at or near the market's peak.
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Originally published by Daily Mail as “Mortgage holders on edge after Commonwealth Bank’s shock $211,000 ‘correction’ prediction for Aussie house prices”.