Gareth Aird, Head of Australian Economics at the Commonwealth Bank, wrote in a research note that the bank expects the Reserve Bank of Australia to start hiking interest rates in November 2022.

As a result, it is forecast that Aussie property prices will “peak” in late 2022 before correcting by as much as 10 per cent in 2023.

According to Mr Aird, the RBA could hike up rates from the current historic low of 0.1 per cent to 1.25 per cent by the third quarter of 2023.

“Interest rates become a headwind on property prices if they are rising. That is the place we believe we are moving towards over the next two years given our expectation for the RBA to commence normalising the cash rate in late 2022,” Mr Aird wrote.

“We expect prices to continue to rise through the first half of 2022, but at a more modest pace.

“We look for prices to peak in late 2022 around seven per cent higher than end-2021 levels. We then expect an orderly correction indwelling prices of 10 per cent in 2023.”

While many hopeful buyers will see Mr Aird’s forecast as good news, it’s important to remember that house prices have surged during COVID-19 and any correction will likely mean a return to “normal” and not a crash or dip.

“We forecast dwelling prices to fall by around 10 per cent in 2023. This may on the surface sound like a large fall. But context is key,” Mr Aird advises.

“Price rises have been exceptional over 2021 and further gains are forecast in 2022.

“A decline in national dwelling prices of 10 per cent in 2023 on our figuring simply take prices back to where they were in Q3 2021 (of course the decline would be larger in real terms).”

Mr Aird’s forecast of an interest rate rise in November 2022 is far earlier than what RBA Governor Philip Lowe has predicted in recent speeches.

Seven days ago Dr Lowe poured cold water on the chances of an interest rate hike in 2022, saying at a business lunch that Australia’s economy “still has a way to go”.

“I would like to repeat a point I made a couple of weeks ago — that is, the latest data and forecasts do not warrant an increase in the cash rate in 2022,” Dr Lowe said.

“The economy and inflation would have to turn out very differently from our central scenario for the board to consider an increase in interest rates next year.”

Dr Lowe said the RBA forecasts underlying inflation — one of the named triggers of an interest rate hike — to reach a midpoint by the end of 2023.