Big bank shocker for Albo, homeowners
Difference between population and dwelling stock growth (cumulative deviation from Q4 2019 to Q4 2025). Source: CBA.
Australia’s largest bank has crunched the numbers on housing forecasts for the next two years with shock fallout for homeowners from its new modelling.
Commonwealth Bank of Australia economists dropped a bombshell – saying their number crunching showed it wasn’t government policy but the Reserve Bank wielding the biggest power to shift property prices across the country over the next two years.
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RBA Governor Michele Bullock wields great power to drive or stem property price surges according to CBA analysis. Source: Getty
Its latest economics update out Monday used two different models to show the Reserve Bank’s February rate hike and expected May increase would subtract 1 percentage point from 2026 price growth forecasts and 2 percentage points from 2027 – far exceeding any impact from changes being floated to capital gains tax and negative gearing.
By contrast, expected changes to CGT and negative gearing would subtract just 0.9 percentage points from annual housing price growth in 2027 – less than half the RBA’s impact, it said.
The bank’s modelling found that without those two rate hikes, house prices would be growing at 5 per cent instead of the forecast 3 per cent in 2027 – with a potential third rate hike in August set to push growth down to 2 per cent nationally.
The report also named the end of 2027 as the date that the sharp gap between population growth and dwelling construction would finally close in Australia – giving renters their first genuine relief in years.
CBA forecast the vacancy rate will rise from 1.6 per cent to 2.3 per cent by the end of next year with rent price growth slowing from 4 per cent to 3.3 per cent.
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Sensitivity of forecasts to cash rate outlook. Source: CBA
But it said the divergence across capital cities was likely to remain throughout this year
“Brisbane and Perth (are) expected to continue to outperform in the near term, supported by tight demand – supply dynamics and economic momentum, though higher borrowing costs and affordability constraints should see growth slow by 2027,” the CBA report said. It tipped Perth to rise 15 per cent this year, with Brisbane to jump 12 per cent and both slowing to 4 per cent in 2027.
“In contrast, Sydney and Melbourne are likely to experience more subdued outcomes, largely reflecting higher construction rates relative to population increases in recent years. In Sydney, relatively softer conditions will also reflect tight affordability constraints and a high sensitivity to interest rate hikes. In Melbourne’s case, a less supportive investor tax backdrop will also continue to weigh on demand.”
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CBA’s latest economic update expects two rate hikes this year, but has factored in a third in August as well.
The analysis released Monday, saw CBA predict that cutting the CGT discount from its current 50 per cent setting to 25 per cent – a change that’s widely tipped for May’s federal budget – would knock 0.8 per cent to 3.9 per cent off dwelling prices.
That level of fall amounts to a drop of $8,000 to $39,000 for a $1 million home.
CBA said moves to restrict negative gearing to just two investment properties, or limit it to one established property while allowing more for new builds – scenarios floated in media reports ahead of the May Budget – would also likely have a smaller impact than previously anticipated, with the changes floated less sweeping than outright elimination of the tax concession.
It said the real drivers of Australia’s housing affordability crisis were interest rates, population growth and a fundamental mismatch between supply and demand.
