HOUSING GENERICS

Homeowners across the country are being prepped to brace for a correction, amid new CBA forecasts. Picture: NCA NewsWire / Max Mason-Hubers

Millions of homeowners are being warned to brace for a brutal property correction, with falls predicted to wipe up to $211,000 off medians, knocking two capital cities back under $1m.

Latest Commonwealth Bank forecasts have dwelling values dropping 9 per cent nationwide, with capital cities to wear an even harsher 10 per cent average hit.

Such a crash, Canstar calculates, would slice between $89,000 and $211,000 off capital city medians.

Dwelling prices are expected to fall further this year. Source: CBA

This comes as a toxic double whammy of three RBA rate rises already in 2026 – with at least one more predicted before Christmas – paired with federal property tax changes trigger a widespread contagion that’s seen prices drop across a staggering 93 per cent of capital city suburbs over winter. That’s almost double the suburbs that saw prices fall in autumn when RBA’s rate hikes began.

CommBank Research economists drastically downgraded their property outlook on the first day of Spring selling season, warning a “deeper correction” in home values will spread across the country – “larger and faster than we anticipated.”

Hardest hit will be the New South Wales capital, according to CommBank Research – with Sydney set to see one of the “quickest and deepest” downturns in 20 years.

CBA predicts Sydney prices will fall a massive 13 per cent from peak to trough, dragging its median house price down over $211,000 to around $1.4m.

Canstar data insights director Sally Tindall, who analysed the CBA prediction’s dollar impact, warned a $211,000 loss was “no longer spare change but a material drop”.

Canstar data insights director Sally Tindall

Melbourne was predicted to see a 12 per cent collapse, which would strip $119,000 off its median home value – dragging it firmly down to around $877,000.

CBA also smashed any notion that mid-sized capitals might be resilient, predicting an 8 per cent price drop for Brisbane, which would wipe $97,000 off its median home price to $1.1m – and that it would knock both Perth ($991,000) and Adelaide ($931,000) down to join Melbourne below the $1m mark.

Homeowners are being warned to tighten their belts, with CBA’s outlook for interest rates now also higher – expecting the Reserve Bank will put in a 0.25 per cent hike in November to take the cash rate to 4.60 per cent, a view shared by ANZ.

NAB is the only one of the big four predicting a single hike of 0.25 per cent in September, but its economics team has flagged the risk of an additional hike in November if inflation refuses to budge.

Projected change to median house prices – CBA forecast – peak to trough. Source: Canstar.

If NAB’s scenario plays out, two back-to-back increases would push the cash rate to 4.85 per cent before Christmas – slapping an extra $183 a month onto repayments for a standard $600,000 home loan, according to Canstar.

Even a single 0.25 per cent hike would add $92 a month, taking the total repayment increase this year to $364 a month.

Ironically, after holding firm to an August rate hike prediction right up until the mid-year RBA meeting, Westpac is now the sole big four holdout – predicting rates will stay on hold for the rest of 2026.

This comes as smaller lenders attempt to steal market share with variable rate cuts below the 6 per cent mark where 52 now sit. A total of 35 have slashed variable rates since June 1 to stay competitive. So far though, three of the big four have refused to entertain any such move while the risk of another RBA hike looms on the horizon.

Updated Canstar tracking revealed just two lenders cut variable rates in the past few days while three have actually put rates up – signalling the will to do battle amid dire economics data may be fizzling.

Ms Tindall said those saving for tough times and home loan deposits should check the fine print on their savings accounts, warning major institutions were playing a sneaky game of “hide the rate cut” by quietly slashing base savings rates while leaving advertised bonus rates intact.

Lowest variable home loan rates. Source: Canstar