National housing prices are expected to drop 20% overall from their peak, according to NAB’s latest quarterly survey, as reported by the AFR’s property editor Nick Lenaghan.

The bulk of the decline is set to come next year for most capitals except Sydney, where the correction has hit harder and earlier.

NAB expects housing prices in Sydney to fall 12.9% this year and 9.4% next year. Melbourne prices are forecast to drop 9.1% this year and 14.1% next year. Brisbane will slip into negative territory this year before declining 9.4% in 2023, on NAB’s forecast.

The correction is yet to arrive in Adelaide, however, which is expected to post a 9.9% gain this year ahead of a reversal next year of 16.3%.

NAB’s quarterly survey of the residential property market was released in the same week as the Reserve Bank’s decision to lift interest rates by a smaller-than-expected 25bps, which buoyed equity investors and real estate pundits.

Higher interest rates, which result in a significant reduction in borrowing power, are the key driver for falls in property prices, as NAB noted in the survey.

A different story is playing out in the rental market, which is tightening significantly as vacancy rates fall. Rents rose in the third quarter and are expected to grow by a solid 3.5% in the next 12 months and 3.8% in two years’ time nationally, according to NAB.