Australian house prices are continuing to fall as property owners in Sydney make a loss on resales in order to escape high interest rates, new data has shown.
Property prices fell a further 1.4% in September. It is the fifth consecutive month values have fallen – in all capital cities except Darwin – after six months of rate hikes.
Core Logic’s research director, Tim Lawless, said Sydney had experienced the biggest drop in prices of any region, with a 9% fall since the market peaked in January – the equivalent of more than $100,000 off the median sale price.
Melbourne was down 5.6% since its February peak – the equivalent of median house values falling by $63,000 – while Brisbane’s values were $33,600 below a peak in June.
“Interest rates are central to this,” Lawless said. “Housing prices in Sydney but also Melbourne are quite a bit higher than most other markets and borrowers would be more thinly stretched.
“Both of these cities also had a demographic headwind – a lot more people have been leaving and interstate migration has been well and truly negative. That trend looks like it’s starting to ease.”
Falls in house prices accelerated in Adelaide and Perth in September but the decline remained more modest than other capitals, off by 0.2% in Adelaide and 0.4% in Perth. Darwin was the only capital city where housing values have not trended lower.
This comes as the Reserve Bank lifted the cash rate to 2.6% on Tuesday, the sixth rise in as many months,, putting even greater pressure on mortgage holders and homebuyers.
Lawless said the largest falls in house prices had been seen in inner-city and low-density markets around Sydney. Of the 10 largest declines, nine were in Sydney’s inner west, eastern and northern suburbs and one was in regional New South Wales.
“It’s a factor of affordability, prices had been rising really quickly,” Lawless said. “Values overshot the market – the northern beaches and Sutherland absolutely surged.”
Topping the list in Sydney was the northern beaches, where values were down by 14.5%, followed by Parramatta, Burwood, Strathfield and Ryde, which all dropped in value by between $32,000 and $40,000.
In unit sales, high-density markets across Waterloo, Zetland and Rosebery took a significant hit, as did Melbourne and Brisbane local government areas.
Lawless said it reflected the “worsening affordability situation” in expensive markets. The median asking price for a house in Sydney in the September quarter was $1,671.006, or $717.844 for a unit.
The combined capital city average for all housing types is $986.937.
Regionally, “tree change” and “sea change” markets that boomed during the pandemic remained relatively buffered from the falls through the June quarter but have since followed capital city markets into a “relatively sharp” downturn, according to Lawless.
Through July and August, regional Australian home values dropped by 2.2% from a peak in June, which is likely to weigh on profitability in the regions going forward.
The flood-hit Richmond and Tweed areas had the steepest quarterly decline of 8%. Lawless said values in the region had fallen by 12.9% since an April peak. But this came off the back of a 51% surge in values – an “extraordinary trajectory of growth”.
The southern highlands and Shoalhaven were both down by 8.1% after a June peak, but the upswing was 59.8%.
The Sunshine Coast experienced the third largest regional drop, with house values down by 7.1% since an April peak, while there were also slight increases in loss-making sales across the Gold Coast and Geelong.
The NSW treasurer, Matt Kean, said on Monday he was confident the state’s market would bounce back despite the grim forecasts: “As interest rates rise, that dampens interest in the housing market.
“We are seeing reports today that the housing market will bottom out by the first quarter of next year and then have a sharp correction and bounce back. That’s good news for homeowners across NSW.”
The premier, Dominic Perrottet, said homeowners should “remain confident” the government would “stand with them”. “We will … make sure that every single person gets through this difficult time,” he said.
