Economist Chris Joye warns of looming recession and record house price falls in some suburbs of up to 40pc

A leading economist has delivered a sobering warning for national house prices, claiming the fall in some individual suburbs could be as high as 40 per cent.

He also warned Australia was poised to break the record for the biggest-ever fall in prices before the end of the year as buyers reel from four interest rate rises delivered by the Reserve Bank so far this year — with the risk of another in November as it struggles to rein in inflation.

Influential commentator Chris Joye, founder and chief investment officer at Coolabah Capital Investments, said prices in Sydney were now dropping at an annual rate of 18 per cent, with his own forecast of a 17 per cent peak-to-trough decline.

The market in Melbourne would not be far off, he said, while also citing claims from some developers that “sales haven’t just slowed, they’re stopped”.

“On our numbers, individual suburbs (in Sydney) will fall as much as 20 to 40 per cent,” Mr Joye told Mark Bouris’ Straight Talk podcast on Monday.

“National house prices are currently falling at about a 16 per cent annual rate. We’re expecting the national peak-to-trough fall to be about 13 per cent.

“We’ll break the record for the biggest fall ever in house prices on our numbers before Christmas. So Sydney’s falling at 18 per cent per annum, Melbourne a bit less than that, but double-digit all around the country.”

AMP is expecting Australian house prices to plunge by 15 per cent — potentially the worst downturn on record and conservatively wiping $140,000 off property values across the country.

Under this scenario, national home values would plunge by $139,971 but in Sydney, house prices would plummet by $241,057, leaving recent borrowers who bought at the top of the market battling mortgage stress with the disaster of severe negative equity where they owed their bank more than their home was worth.

While Perth has been somewhat shielded from steep falls, Perth property analyst Gavin Hegney predicts values will fall a further 10 per cent from the current median dwelling price of $975,000 before bottoming out mid next year.

He said the 10 per cent forecast over the next nine months was a continuation of the 16 per cent annualised reductions experienced in the past quarter.

If it eventuates, it would shave about $100,000 from median dwelling prices.

Recession warning

After hiking the official cash rate to a 15-year high of 4.6 per cent last, RBA governor Michele Bullock warned it could take a recession to control inflation.

The central bank said the Middle East conflict and AI data centre construction were expected to keep inflation elevated, but failed to pin the blame on runaway government spending, which now accounts for just shy of 27 per cent of gross domestic product.

Mr Joye dismissed claims by Federal Treasurer that the now eight-month war between the US and Iran — and the resultant surge in fuel prices — was the primary driver of rising inflation, saying that was “bulls**ting” the public.

He said $660 billion of government spending had been racked up on super cheap credit since 2022 by State and Federal government “professional politicians”.

“It’s all public spending. It’s all population growth and migration,” he said.

“And it’s all productivity. I mean, the oil price stuff is at the margins. It’s not ... the reason the RBA hasn’t hit its inflation target since 2021. That’s a recent event. So, he’s just bulls****ing.”

Mr Joye also warned the risk of a recession was real and that there could be “a big increase in unemployment, a lot of businesses are going to go bust and a lot of people are going to lose their jobs”.

“I think it’s going to be tough,” he said.

“They’ll be adversity and your house is not going to be worth as much as it was, and your super’s probably not going to be worth as much as you thought it was going to be worth, and you’re going to have to work a little longer.

“Maybe you won’t retire when you thought you were going to retire.

“It’s going to be tough.”