In SQM Research’s worst-case scenario, house prices could potentially fall by 4% over the next year.

SQM’s Housing Boom and Bust Report 2022 analyzed four scenarios that could affect home prices next year.

The report’s baseline scenario assumes that spot rates will remain unchanged, but the Australian Prudential Regulation Authority (APRA) will introduce further restrictions on lending by June 2022.

Under this baseline scenario, price declines in some cities are expected as early as mid-2022, which could lead to prices ending the year with just 5% annual growth.

SQM Research Director Louis Christopher said the national housing market is beginning to show signs of peaking towards the end of the current year.

“We expect the market to peak in 2022, with further expected intervention from APRA, which could come next month, halting price momentum.

Mr Christopher said that if prices do not slow down next year, it is possible that APRA will continue to make changes in lending until profits decline.

“We cannot afford another year of more than 20% gains in the national housing market,” he said.

“And so, to ensure a soft landing for the market, it’s best that sooner or later we step in extra to control property valuations.”

Worst case prices

Worst-case scenario, the study proposes further APRA intervention by March 2022, with the spot rate rising to 0.25% – 0.5% in the first half of the year.

Against this background, prices are expected to be 4% lower for the year.

Brisbane will defy the general downward trend and is expected to see a 3% to 6% increase in this scenario.

Sydney and Melbourne slow down

In all scenarios, Sydney and Melbourne are likely to see price declines.

The additional restrictions that could be imposed by APRA will affect the two cities the most.

Melbourne in particular may also be further affected by interstate migration.

However, there could be a positive trend in the single markets of these two cities.

SQM predicts that rents and unit prices will outperform homes in these two state capitals in 2022, with net interstate and overseas migration expected to increase as the border reopens.

Photo by Jessica Tan on Unsplash.

Top Suburbs: East Victoria Park, Bligh Park, Torrensville, Flemington, Windale

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