House prices could plummet by 12 per cent in just one year in the largest downturn for three decades, experts say.
Millions of dollars could be wiped off Australian property values within the next 12 months as the housing market continues its downward spiral.
Experts have also warned property buyers banks could slash the amount of home loans they approve by a third in the wake of the banking royal commission.
‘Our view is that house prices may eventually fall by 12 per cent, which would be the longest and deepest housing downturn in at least three decades,’ Capital Economics chief economist Paul Dales told The Sydney Morning Herald.
Economists are predicting house prices could fall by 12 per cent, which would be the biggest downturn in 30 years (stock image)
The prediction comes after Australian median house prices slid 3.1 per cent from January to September 30.
Significant declines in Sydney and Melbourne dragged down the overall national market, with Perth prices also falling.
Sydney’s median house price fell to $976,365 in September, the lowest level since 2015 and the third straight month the figure has been below the $1million mark, real estate data group Core Logic revealed.
Detached property values plunged by 7.6 per cent in just one year, after peaking in mid-2017.
Experts have also warned banks could slash the amount of loans they approve by a third in the wake of the banking royal commission (stock image)
Melbourne also fared badly, with median house prices falling at an annual pace of 4.5 per cent to $799,657, after hitting a peak in November last year.
But prices in Brisbane, Adelaide, Hobart, Darwin and Canberra have bucked the trend, increasing slightly in the last 12 months.
The decline in property values comes amid warnings of a ‘credit crunch’.
UBS analyst Jonathan Mott told The Sydney Morning Herald the royal commission’s final report could recommend banks carry out a full income and expense verification to better evaluate the financial position of a borrower.
‘We believe the Australian banking sector is facing a period of substantial and sustained earnings pressure which is likely to last several years,’ Mr Mott said.
‘We estimate that a move to full expense verification is likely to reduce maximum borrowing capacity by (about) 30 per cent.’
The Reserve Bank will meet on Tuesday, with the cash rate expected to remain at a record low of 1.5 per cent.