CBA forecasts when home buyers can expect Canberra property prices will fall

In its latest forecast, the lender said the Australian housing market was in the "twilight of an incredible boom", spurred on by record low mortgage rates.

CBA expected property prices to rise further next year, albeit at a slower rate than 2021, before falling in 2023.

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On the back of 22 per cent growth in 2021, national prices are predicted to rise a further 7 per cent next year and fall by 10 per cent in 2023.

Canberra properties, which have seen 26 per cent growth this year, are also expected to rise by 7 per cent before a 10 per cent decrease in 2023.

While the price drop would be welcome news for some, it still means Canberra property prices would be 23 per cent higher in 2023 than they were at the start of 2021.

The biggest price drops are predicted for Sydney and Hobart, where dwelling prices are set to fall by 12 per cent in 2023.

Across the capital cities, house prices are forecast to drop by 11 per cent, slightly more than unit prices, which are expected to fall by 7 per cent.

In the report, CBA head of Australian economics Gareth Aird said the forecast is based on the expectation the Reserve Bank of Australia will adjust the cash rate to at least 1.25 per cent by the third quarter of 2023.

"The cash rate is forecast to lift because the economy will be at full employment and annual wages growth will have pushed to the desired level of 3 per cent," he wrote.

"Stronger wages growth will provide a partial offset to rising interest rates on the property market. In addition, a lift in population growth as the international border reopens will boost the underlying demand for bricks and mortar, particularly inner-city apartments. As such, we expect house prices to decline by a little more than apartment prices over 2023."

Recent CoreLogic data revealed the gap between wage growth and house price growth was larger in the ACT than anywhere else in Australia.

Over the past 20 years, wages across the private and public sector increased 81.5 per cent in the ACT, while dwelling values rose 224 per cent.

Mr Aird said while price corrections were expected, Australian property prices were still rising at a reasonable pace.

"A cooling market is not the same thing as a falling market," he wrote.

"We expect the pace of monthly gains to moderate quite significantly by mid-2022 due primarily to higher fixed mortgage rates."

Subdued buyer expectations, general fatigue and an anticipation of RBA rate hikes will likely lead to a peak in national property prices in the third quarter of 2022, Mr Aird said.

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