Australian housing market poised for a downturn

Australian house prices have lost some momentum in recent months. With the Reserve Bank of Australia set to hike rates to 4.60% in the coming months, we think house prices will fall outright before long. Under our baseline scenario, house prices will decline by around 6% from peak to trough, meaning the downturn won’t be particularly steep by past standards. However, in an adverse scenario where the Bank is forced to raise rates to 5.10%, we wouldn’t rule out a double-digit peak-to-trough fall.