Australian property prices had their biggest single-month decline since 1983 as rising interest rates hit home values.
Prices fell 1.6 per cent Australia wide in August, with every capital except for Darwin recording losses, CoreLogic data revealed on Thursday.
Sydney prices dropped 2.3 per cent, Brisbane prices fell 1.8 per cent and Melbourne’s declined by 1.2 per cent.
The housing downturn, which began in June, is accelerating and broadening out from major capitals to regional areas, CoreLogic research director Tim Lawless said.
Prices will plunge further this year as interest rates continue to rise, squeezing the borrowing power of potential buyers, particularly in cities where prices are already sky high, he said.
“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” Mr Lawless said.
“There is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values.”
Nationally prices are falling by 19.2 per cent on an annualised basis, although national values are about 4.7 per cent higher when compared to the same period in 2021.
Downturn broadens, accelerates
The accelerating downturn is driven by larger property price falls across the major capitals – particularly in Brisbane – but also a broadening to regional areas which saw prices rise much more on a percentage basis during COVID-19.
Regional home values fell 1.5 per cent in August, nearly as much as the 1.6 per cent decline in combined capital values, which CoreLogic said is a sure-fire sign that country markets are catching up to larger city hubs.
“The largest falls in regional home values are emanating from the commutable lifestyle hubs where housing values had surged prior to the recent rate hikes,” Mr Lawless said.
Across 41 regional areas tracked by CoreLogic, only seven areas experienced price rises in August – the northern suburbs of Adelaide, Perth’s north-east and the Coffs Harbour-Grafton region in New South Wales.
Brisbane has seen an ‘‘acute’’ turnaround in home values after taking longer to swing into outright downturn than Sydney and Melbourne over June and July.
“It was only two months ago that the Brisbane housing market peaked after recording a 42.7 per cent boom in values,” Mr Lawless said.
“Over the past two months, the market has reversed sharply with values down 1.8 per cent in August after a 0.8 per cent drop in July.”
Property prices to fall further
Although these house price falls are the biggest seen in a single month in more than a generation, experts believe this is just the start, amid expectations the Reserve Bank will hike interest rates further to curb soaring inflation.
Major banks are predicting house prices will fall almost 20 per cent over the next 18 months, and while others think the downturn will be smaller, most agree that a correction is overdue after a huge rise in values during the pandemic.
CoreLogic said home values in all capitals and most regional areas – except for Melbourne – are still 15 per cent or more above pre-pandemic prices.
This suggests most home owners have a “significant equity buffer” before their home is worth less than what they paid for it, they said.
“A 15 per cent peak-to-trough decline would roughly take CoreLogic’s combined capitals index back to March 2021 levels,” Mr Lawless said.
“Additionally, many home owners would have had at least a 10 per cent deposit and paid down a portion of their principal, [so] the risk of widespread negative equity remains low.”
