The Reserve Bank of Australia has warned homeowners the value of their properties could take a massive hit after a series of interest rate hikes.
Australia’s central bank’s modelling has suggested home values could fall by as much as 30 per cent if interest rates stay where they are.
The Australian reported, RBA head of domestic markets Jonathan Kearns told a property summit in Sydney on Monday that the bank’s rapid fire series of rates hikes could send home prices falling by around 15 per cent.
However he warned that if rates stay at their current level – the official cash rated has skyrocketed from 0.1 per cent in April to 2.35 per cent – that the RBA’s modelling suggests home prices could plunge by as much as 30 per cent.

Home prices could take a tumble. Picture: Newscorp- Daily Telegraph / Gaye Gerard

Mr Kearns said the RBA’s April estimate that home values could spiral downward by 15 per cent was based on a cash rate of 2 per cent. Given interest rates had now been pushed higher than that it could be expected that prices could fall further.
However Mr Keans placed a large asterisk against that modelling of a possibility of a 30 per cent fall in prices, around the same value that prices in many markets boomed by in 2021.
He said the RBA’s modelling was “not actually a prediction of how much housing prices would change”.

“Rather it was an estimate of how sensitive housing prices are to interest rates, assuming that all the other costs and benefits to housing don’t change with interest rates,” he said.
“Many factors other than interest rates also influence housing prices. For example, the demand for housing would be greater with stronger household income growth, increased population through immigration, or a preference for fewer people living in each household.

Governor of the Reserve Bank of Australia, Philip Lowe. Picture: NewsWire / Monique Harmer

RBA boss Philip Lowe has taken plenty of flack for the bank’s series of rate rises after suggesting during the pandemic that rates wouldn’t move from their record low of 0.1 per cent, until 2024.

Source: realestate.com.au