Homes around Australia have lost an estimated average of $64,820 in value since May last year according to CoreLogic's Daily Home Value Index.
Between May 2022 and January 2023, Australian home prices saw a decline of -8.40 per cent, breaking the previous record in peak-to-trough declines, when home values fell -8.38 per cent between October 2017 and June 2019.
"While the housing downturn between 2017 and 2019 lasted 20 months, the new record-breaking price falls have played out in less than nine months, with further falls expected in the months ahead," CoreLogic Australia's Head of Research Eliza Owen said.
CoreLogic bases its Home Value Index on three broad housing types: detached houses, units and a combined dwellings index that includes both houses and units.
Why are house prices tanking now?
Ms Owen says the main force behind the decline is the dramatic cycle of rate hikes in the back half of 2022.
"A 300-basis point increase in the underlying cash rate over just eight months has resulted in a rapid reduction in borrowing capacity, lowering the amount buyers can offer for homes," Ms Owens said.
Household debt is also a factor in the price of Australian homes, households with higher debt are hit harder but interest rate rises are eroding any savings that could be used for a home loan deposit.
It's important to remember that this dramatic downturn of housing prices is coming off a very high base, Ms Owens says.
Dwelling values increased an eye-watering 28.9 per cent between September 2020 and May 2022, which was the fastest rise in home values nationally on record.
So, while the current decline might seem extreme, at the end of 2022, home values were still 16 per cent higher than they were five years ago, and 59.8 per cent higher than they were 10 years ago.
Which cities have seen the biggest drops?
Australia's three biggest capital cities, Sydney, Melbourne and Brisbane, are responsible for the bulk of the decline, according to CoreLogic's data.
The following numbers show the percentage and estimated dollar value change in homes from May 7, 2022 to January 7, 2023.
National
Percentage change: -8.4 per cent
Dollar value change: -$64,820
Sydney
Percentage change: -13 per cent
Dollar value change: -$150,758
Melbourne
Percentage change: -8.6 per cent
Dollar value change: -$70,243
Brisbane
Percentage change: -10 per cent
Dollar value change: -$78,381
Adelaide
Percentage change: -1.6 per cent
Dollar value change: -$10,395
Perth
Percentage change: -0.7 per cent
Dollar value change: -$3,897
*Note: CoreLogic's Daily Home Value Index only tracks five major capital city and national figures.
Home values 'expected to continue falling'
According to Ms Owen, Australians can expect home values to decline this year.
"Over the coming months, housing market conditions are expected to remain soft," Ms Owens said.
"The underlying cash rate is likely to see further increases in 2023 and ongoing increases in interest rates will further erode the borrowing capacity, likely prolonging the country's housing downturn until interest rates stabilise."
