A prominent economist has broken ranks to warn Sydney and Melbourne property prices are likely to fall next year after the cash rate hit a 12-year high.
Sydney and Melbourne house prices could fall by as much as 4 per cent in 2024, SQM Research managing director Louis Christopher forecast.
SQM Research warns Sydney and Melbourne property prices could fall. Photo: Peter Rae
His prediction for moderate declines comes after the cash rate reached 4.35 per cent in November, and contrasts with bank economists’ predictions of continued modest growth next year.
“We’ve reached the point where essentially this is going to create a little bit of a tipping point in the market,” Christopher said. “We’re not forecasting a crash. There is a clear housing shortage out there, to have a crash we need a surplus of housing.
“But can we have a moderate fall in housing prices based on a slowing economy and elevated interest rates? My word, we can.”
He expects price rises in Brisbane (4 per cent to 8 per cent) and Perth (5 per cent to 9 per cent) in contrast to the turnaround he tips for the two largest cities, saying Sydney house prices are likely to range between 4 per cent falls and a flat result in 2024, and Melbourne between 4 per cent falls and a 1 per cent rise.
“We’re expecting price falls for middle and outer ring freestanding houses [in Sydney] offset by some price gains at the top end of the Sydney market and offset by outperforming units,” Christopher said, noting a similar trend in Melbourne.
This base case scenario is based on a cash rate between 4.1 per cent to 5 per cent, population growth slowing to 460,000 or less and unemployment rate increasing to 4.5 to 5.5 per cent.
Christopher said those conditions would create a significant