CBA predicts house prices will drop in 2023 but apartments fare better

The Commonwealth Bank of Australia (CBA) has forecasted that the nation’s housing prices will drop as prices start to moderate next year before dropping significantly in 2023. The forecast indicates that Sydney house prices are poised to drop by 12% and Melbourne by 10% by 2023 as the RBA takes the cash rate to 1.25%. 

The prediction for apartments and townhomes is more promising, with units to increase by 9% next year before dropping by 7% in 2023 - creating a 2% increase overall. 

Gareth Aird, Head of Australian Economics at CBA, wrote that nationally, dwelling prices are expected to drop by 10% as higher interest rates put downward pressure on demand. 

Mr Aird commented that the predictions took into account higher fixed mortgage rates, affordability constraints and natural fatigue after a period of extraordinary price gains. “Our expectation for the RBA to commence normalising the cash rate in November 2022 means that we expect national dwelling prices to peak in late 2022 around 7% higher than end 2021 levels,” he said. 

Westpac predicts softer changes with dwelling prices up 8% in 2022 and down 5% in 2023.

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