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Home prices have fallen for six months in a row, taking property values back to the same level as a year ago. Australia’s national median home value declined by 0.2% last month, according to the latest realestate.com.au Home Price Report, with interest rate pressures weighing on house prices and more homes on the market across much of the country. Values at the national level are back to where they were a year ago, with prices down 3.3% from the peak reached in March.
The sixth straight month of price declines has extended the downturn which began after the Reserve Bank started raising interest rates in February this year. Borrowers have been hit with three more hikes since then, including Tuesday’s 25 basis point increase which took the cash rate to 4.6% – a 15-year high. The rate rises have reduced the amount that buyers can borrow to purchase a home and further strained housing affordability, which has sunk to a record low .
Tightened lending conditions have coincided with property tax changes in the federal budget in May that reduced investor demand and have taken much of the heat out of the market in recent months. Home prices in Sydney have declined about 5% in the past year, according to the latest realestate.com.au Home Price Report. Picture: Getty With homes taking longer to sell, the total number of properties on the market is about 8% higher than a year ago at the national level, with total listings up by more than 30% in some capitals.
But although buyers have more homes to choose from and more time to make a decision with reduced competition, the dent to borrowing power from rising interest rates has outweighed much of the benefits of buying amid lower prices. Higher interest rates and reduced borrowing capacities have increasingly pushed buyers toward more affordable parts of the market, according to realestate.com.au senior economist Eleanor Creagh . “More affordable regional markets continue to record growth, while some of the country's most expensive capital city markets have seen sharp downturns,” she said.
“The divergence reinforces the role of affordability in shaping performance, as higher interest rates constrain borrowing capacity.” How home prices changed around Australia in September Home prices declined in all the capitals except Hobart where prices remained flat, and Darwin where values increased marginally. Adelaide recorded the largest price fall in September, with values down 0.6% over the month, following a 0.9% decline in August. The city’s 12-month price growth now stands at 5.6% – well down from the double digit growth recorded at the peak of the market.
Prices fell 0.3% in Sydney and Perth, 0.2% in Melbourne and Brisbane and 0.1% in Canberra. Darwin prices rose by just 0.1% in September, but the city remains the strongest capital for price growth, with values up 12% compared to a year ago. Darwin was the only capital city where prices rose in September, recording a marginal 0.1% increase.
Despite recent weakness, prices are still up 6.7% in Perth and 4.1% in Brisbane, while Hobart prices are 5.3% higher after holding steady last month. However, prices are 5.2% lower in Melbourne and 5% lower in Sydney compared to the same time last year, illustrating how the property downturn has been felt unevenly across major property markets. Sydney and Melbourne have had the deepest corrections, Ms Creagh said, but some of the sharpest falls in recent months have occurred in markets that were previously the strongest performers.
“Downward momentum has strengthened in Adelaide, Brisbane and Perth, where conditions had previously been more resilient,” she said. Adelaide recorded the biggest price fall of all the capitals in September, but prices still remain close to record highs. Picture: realestate.com.au/sold Despite the dip in prices in the past few months, Adelaide real estate agent and Belle Property Henley Beach and Glenelg principal Jae Curtis said buyers and sellers were still transacting and values remained close to record highs.
“There's been a correction in pricing, but it’s not too significant,” he said, adding that prices were only a few percentage points below recent peaks. “Things are still moving fairly well within the western suburbs; it just comes down to having the appropriate price point for the property,” he said. However, the shift in pricing had meant some discretionary buyers and sellers were holding back, Mr Curtis said.
“People that don’t necessarily need to sell are happy and willing to sit on their hands for a little bit and rethink their move,” he said. Regional resilience Prices remained more resilient in regional Australia, with values unchanged over the month in most regional markets. In fact, values in regional South Australia, Tasmania and the Northern Territory remain at record highs.
“Relative affordability is generally providing regional markets with a greater degree of resilience as higher interest rates constrain borrowing capacity,” Ms Creagh said. Get your realEstimateTM Track your property's value and unlock insights and data tailored for property owners. Prices were more than 12% higher than a year ago in the New England region of NSW, which includes Armidale and Tamworth.
Compared to a year ago, home prices are up about 11% in Launceston and Toowoomba, about 8% in Bunbury, Townsville and Cairns, and almost 5% in Ballarat. Home prices in these cities are typically more affordable than in the larger capitals, with median values ranging between about $600,000 and $800,000. Prices have remained more resilient amid rising interest rates in many regional cities, such as Ballarat in Victoria where homes are typically much more affordable than in Melbourne.
Picture: realestate.com.au/sold Ballarat real estate agent and Buxton Ballarat director Peter Burley said the higher interest rate environment had prompted more buyers to look towards affordable regional cities. “As interest rates rise, the major capital cities take the largest hit because the median house price is significantly higher than ours,” he said. “Families dealing with the cost of living are looking to regional cities like Ballarat.
It’s still such an affordable city to purchase, and you also get a lot more for your money.” Rate hike dampens outlook Ms Creagh said the most recent interest rate hike could keep conditions subdued in the months ahead. “Further price falls are likely over the coming months as this week's interest rate rise, tax changes and the cumulative impact of higher borrowing costs weigh on demand,” she said. “However, resilient employment, limited forced selling and homeowner equity buffers should contain the severity of the adjustment.”
Source: realestate.com.au
