Australian mortgage holders are growing increasingly anxious after one of the nation’s big four banks cautioned that rising interest rates could put further pressure on property prices, with Sydney expected to bear the brunt of the downturn.
In its latest housing market forecast released this week, Commonwealth Bank said national home values could slide by nine per cent, while capital city property prices may fall by around ten per cent on average.
CBA economists warned that Australia’s housing market is heading for a “deeper correction”, with the decline in home values unfolding more quickly and across more areas than previously expected.
“The adjustment over the past three months has been larger and faster than we anticipated,” senior economist Trent Saunders said on Tuesday.
The report identified Sydney and Melbourne as the weakest major property markets, noting that Sydney dwelling values dropped 1.4 per cent in August and are now 7.1 per cent lower than their February peak.
Melbourne prices fell 1.1 per cent and are 6.5 per cent below their previous peak.
CommBank’s economists said the bigger change in recent months has been in Brisbane and Adelaide, which have each recorded three consecutive monthly price falls, while Perth has fallen for four months in a row.
Financial comparison site Canstar published analysis of CommBank Research, seen by realestate.com.au, which predicted median property prices could fall by between $89,000 and $211,000 across the capital cities.
Aussie homeowners have been warned to brace as property values are expected to take a downturn (stock image)
Commonwealth Bank economists said this week that there is an upcoming ‘deeper correction’ in home values for Australia
CommBank forecast Sydney house prices would fall 14 per cent from peak to trough, cutting median house values by about $211,000.
In response, Canstar’s data insights director Sally Tindall warned this was ‘no longer spare change’ but represented a significant hit to homeowners’ wealth.
Melbourne is expected to take a 12 per cent hit, stripping $119,000 from median home values, while Brisbane, Perth and Adelaide are also forecast to suffer significant declines.
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Modelling predicts an eight per cent fall in Brisbane, wiping $97,000 off its median home price.
Both Perth and Adelaide median house prices would be knocked below the $1 million mark, down to $991,000 and $931,000 respectively.
The forecasting from CommBank Research comes as experts predict another Reserve Bank of Australia interest rate rise before Christmas.
If the board of the RBA makes that call, it would be the fourth increase of 2026.
CommBank said higher interest rates could put further pressure on homeowners, forecasting the cash rate could rise by 0.25 percentage points in November to 4.60 per cent. ANZ made the same prediction.
CBA’s forecast predicts home values will drop more over the rest of the year
Canstar’s data insights director Sally Tindall warned the decline in property values was ‘no longer spare change’ but represented a significant hit to homeowners’ wealth
This would add around $92 a month to mortgage repayments, taking the total increase this year to about $364 a month.
Meanwhile, National Australia Bank has a bleaker prediction, suggesting back-to-back rate rises could push the cash rate to 4.85 per cent before the end of the year.
According to Canstar, this could add an extra $183 a month to repayments on a standard $600,000 home loan.
For homeowners concerned about these forecasts, Ms Tindall urged Australians to check their savings accounts.
She said banks are quietly cutting base interest rates while keeping higher bonus rates advertised.