In a stark warning for property owners today, the Reserve Bank of Australia is forecasting home values will plummet by 20 per cent in two years.
RBA documents released under Freedom of Information by the bank show it believes the the property market will endure its biggest hit since the 1980s, the Australian Financial Review reports.
The dire forecast is down to the big rise in interest rates to try and stem inflation, with cash rate is expected to surpass 3 per cent by Christmas.
The RBA internal papers show the bank expects prices to fall nationally by 11 per cent by the middle of next year before levelling out.
Prices in Sydney and Melbourne are likely to fall by 1.5 per cent a month through the rest of 2022.
But the national drop could be even larger, at 20 per cent by the end of 2024, depending on how people respond to both the fall in prices and to even higher interest rates.
Prices would likely continue to decline, the RBA economist quoted in the papers said.
"We're now anticipating housing prices to decline over the next few years. That reflects the ongoing slowing in momentum in the market and the steepening of expectations for the future path of interest rates," they said.
READ MORE: Why are Australia's interest rates still rising?
Meanwhile, Australians are being warned the economy is entering the slow lane with the Treasurer to confirm growth has been downgraded.
Ahead of tomorrow's federal budget, the Albanese government has released updated figures that show the GDP growth forecast has been downgraded by 1 per cent, wiping about $25 billion off the economy.
Treasurer Jim Chalmers is expected to soften the impact on ordinary Australians by pausing spending in some areas, such as infrastructure, and redirecting it to other priorities including social security spending.
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