Pause in house price declines to prove temporary

The seven-month run of house price declines recently ground to a halt, with the Case-Shiller index showing an increase in prices in both February and March. This was partly driven by the temporary boost to demand at the start of the year from declining mortgage rates. But rates have since returned close to the double-decade highs set in October, which has caused demand to fall to its lowest levels in almost 30 years. Given this and a weakening economy, we expect sales will remain low and that price growth will turn negative again later this year. In the rental sector, prices are headed for an even larger correction. We expect apartment capital values will plunge a further 20% in 2023 and 2024, resulting in a peak to trough fall of around 25%.