Real estate is among the most sensitive sectors of the economy to interest rates. For instance, in 2022 we experienced eight consecutive increases to combat inflation, which still impacted home prices in Australia.
Overall, national housing values shrank from $9.6 trillion in December 2021 to $9.4 trillion in November 2022, while the estimated annual sales fell 13.3 per cent, compared to a year ago, with approximately 535,000 homes sold across Australia.
In 2022, which Sydney suburbs experienced the biggest falls?
Suburbs in Sydney’s City and Inner-South, Northern beaches and Eastern suburbs regions dominated 2022’s list for the largest falls in house and unit values across the capital cities, according to CoreLogic.
Narrabeen, Surry Hills and Redfern houses recorded the largest falls in value over the year, down more than 25 per cent, while unit values in Centennial Park and Mona Vale fell by 23.1 per cent and 20.8 per cent, respectively.
Capital city houses: Strongest 12 month drop in values
| Suburb | Annual change | Median value | |
| 1 | Narrabeen | −26.8% | $2,592,772 |
| 2 | Surry Hills | −25.4% | $1,789,868 |
| 3 | Redfern | −25.3% | $1,612,519 |
| 4 | Birchgrove | −24.4% | $2,643,555 |
| 5 | Rosebery | −23.6% | $1,853,386 |
| 6 | Camperdown | −22.9% | $1,585,315 |
| 7 | Waverley | −22.7% | $3,153,262 |
| 8 | Newtown | −22.6% | $1,548,025 |
| 9 | Darlington | −22.5% | $1,538,814 |
| 10 | Chippendale | −22.5% | $1,511,532 |
Data to November 2022
Source: CoreLogic Get the data
House prices in 2023: what can we expect?
There is no crystal ball to predict the future, but we do know that interest rates will have a significant impact on the outcome with some economists expecting further rate hikes in early 2023, with the cash rate peaking at 3.6 percent by March, and then falling again in 2024, and then settling at 2.5 percent by mid 2025.
As long as the cash rate does not exceed 4%, we anticipate that the housing market will bottom and recover by the end of 2023 early 2024.
