Property prices are continuing to decrease nationally as higher interest rates bite, with capital city housing markets falling by up to 6 per cent in the past three months.
CoreLogic data shows that in September, properties were sold for 1.4 per cent less on average nationally than in August.
The only capital city that didn't witness a monthly fall was Darwin, with values dropping 1.8 per cent in Sydney and by almost as much in Brisbane and Canberra.
Sydney's property market has now dived 6.1 per cent in the past three months, while Hobart and Canberra have also shaved off 4.5 and 4.4 per cent respectively.
Prices in regional Australia are also falling.
Country and regional city homes had been withstanding the pressure until recently, but CoreLogic's Tim Lawless says that market is now following the broader downward trend.
"It is absolutely a buyers' market," Mr Lawless said.
"Even going back to the last recession in the early 1990s, housing prices weren't falling this quickly in Sydney."
Standalone homes are witnessing bigger falls than apartments and units.
Standalone homes lost 1.5 per cent in September, while units and apartments dropped by 0.7 per cent. On a quarterly basis, homes are down 4.6 per cent while units have fared better at 2.6 per cent lower.
The Reserve Bank has been raising the cash rate from its historic low since May.
It is currently at 2.35 per cent, and some economists are tipping that tomorrow it could go up as much as to 2.85 per cent.
Mr Lawless said the cash rate hikes were clearly a big factor in the dropping property prices, with buyers having their purchasing power restricted as banks pass on higher interest rate repayments.
Mr Lawless said property prices didn't drop by quite much in September as they did in August, when they dropped by 1.6 per cent in a month.
He's unsure if that reflects an easing in the downward trend or just a midway plateau.
Many sellers have been holding off from listing properties for sale amid the uncertain market.
Meanwhile, data from the Australian Bureau of Statistics shows that the number of home loans being taken out has been steadily dropping since June.
"The limited flow of supply coming into the market is probably helping to keep somewhat of a floor under housing prices," Mr Lawless said.
"Normally at this time of the year, we do start to see the flow of new listings picking up quite substantially. But this year, it's been the opposite.
"We've seen a reduction in the flow of new listings coming to market, probably highlighting that potential vendors are willing to wait this out until selling conditions improve a little.
"But also we saw a few other signposts that improved over the month. We saw the auction clearance rate picked up a little bit.
"Potentially, we may be moving through the worst of the downturn. But we are still expecting housing values to trend lower over the coming months, at least until interest rates start to stabilise."
Property prices shot up 25.5 per cent nationally during the pandemic as the cash rate sat at its historic low.
Already, the market has lost 5.5 per cent from that peak.
Some economists are tipping it will drop by as much as 10 to 15 per cent.
"I still think a 10 to 15 per cent drop is very reasonable," Mr Lawless said.
"Of course, it really depends on what happens with interest rates. How high do they go? And how long do they take to get there.
"We haven't seeing any evidence of distressed sales or panicked selling through the downturn to date."
Rents continue to rise with apartments soaring at record highs
As the price of properties being sold drops, Australia's renters are continuing to suffer through increasing hikes by landlords.
One in three Australians rent.
Rents have been soaring nationally as the amount of places to let has been at incredible lows.
The issue has been creating an affordability crunch in many markets and concerns that people are ending up homeless or in financial stress, due to rising rents coupled with soaring inflation.
CoreLogic's data shows rents rose 0.6 per cent in September.
Mr Lawless said the positive was that this was the smallest monthly increase in rents since December 2021.
"A gradual slowdown in rental growth in the face of such low vacancy rates could be an early sign that renters are reaching an affordability ceiling," he said.
"Since the onset of COVID, capital city rents have risen 16.5 per cent and regional rents are up 25.1 per cent."
Overall, units and apartment rents have shot up by 11.8 per cent in a year, which is a record high for annual growth.
Standalone homes are almost up by 10 per cent in a year.
There are concerns the rental market will get even tighter as overseas migration returns to Australia after the pandemic, which will see even more demand for rental properties.
Mr Lawless said it may turn out that people who moved into their own rental dwellings during the pandemic may now be forced to move back into share houses to make ends meet.
Some landlords offered up cheap rents for city apartments at the start of the pandemic, when many people were working from home or moving regionally.
"Those days of falling inner city unit rents, which is what we saw earlier in the pandemic, is now completely the opposite," Mr Lawless said.
"Some of the strongest rental markets are now in those inner city high density markets."
"We know that there will be lot of competition in these markets as overseas migration picks up again and more workers return to work (in the cities) as well."
Mr Lawless said it is unclear if landlords who are facing higher mortgage repayments as interest rates rise are passing that onto their tenants.
"If a landlord can pass on higher mortgage rates to the rental rates, then absolutely they will."
"I think any private sector investor will be looking to compensate themselves for higher mortgage repayments.
"And in this very tight rental market, most of them are able to do it, simply because vacancy rates are so low and rental demand is so high.
"Keeping in mind, most states will have regulations around how many times rents can be increased during a 12 month period."
