Housing prices to tumble

HOUSING prices could fall by up to 10 per cent next year, according to HSBC, although the bank has tipped demand in regional areas to remain high.

The bank’s chief economist, Paul Bloxham, said the local housing market had boomed during the pandemic “supported by the sharp fall in interest rates to all-time lows and the forward guidance” from the Reserve Bank indicating they would remain low.

Mr Bloxham said he expected housing prices to rise on average by between 5 per cent and 9 per cent this year.

“However, sharply higher than expected inflation and an abrupt shift in the RBA’s cash rate guidance means we expect the cash rate to rise to 1.35 per cent by the end of 2022 and 1.85 per cent by (the second quarter of) 2023, which is set to drive housing price falls beginning in the second half of 2022,” his note reads.

But Mr Bloxham, in his note, said he expected demand for housing in the regional and smaller cities “to remain above pre-pandemic levels, as the pandemic means increased work from home is a part of the ‘new normal’.”