HSBC economist warns correction is "just beginning" for property markets
Sydney and Melbourne dwelling values are driving a broader slide in Australian house prices, with HSBC forecasting a national correction of as much as 8%.
National home values fell 0.4% in June, marking the fastest monthly pace of decline since 2022. Sydney recorded the steepest fall, down 1.2% for the month and 3.2% over the quarter, according to data from Cotality. Melbourne followed with a 1% monthly fall and a 2.6% quarterly decline.
HSBC chief economist Paul Bloxham attributed the slowdown to recent government tax changes affecting investment properties, combined with the Reserve Bank of Australia's three earlier cash rate increases, which he said have "rapidly sapped investor demand."
"As we see it, first-home buyers and other owner-occupiers are unlikely to want to try to 'catch a falling knife'," Bloxham (pictured right) said.
"With no rate cuts expected anytime soon (there is still some risk of another hike), we expect no near-term circuit breaker, which means the housing price correction is likely to continue for some time yet."
HSBC's base case anticipates prices declining through the remainder of this year, followed by a further fall of between 2 and 6% across 2027. Combined, this points to a peak-to-trough correction of up to 8%.
Bloxham said the latest monthly figures suggested the outlook carried further downside risk. "The pace of decline in the June figures suggest the risks to this view look tilted to the downside too," he said.
HSBC expects the price falls to extend well beyond the two largest cities. While Sydney and Melbourne have already softened, the bank anticipates the correction spreading to Perth, Brisbane and Adelaide over coming quarters.
Auction clearance rates have remained below 50% for five consecutive weeks, Cotality figures show. The preliminary clearance rate for the most recent week edged up to 45%, from 42.3% the previous week
Separate forecasts from Domain project Sydney prices falling by up to 7% and Melbourne by up to 8% in the 2027 financial year, while Brisbane, Adelaide and Perth are expected to continue growing over the same period.
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