Australia’s property prices have plummeted for a seventh straight month, with the decline tracking faster than any previous downturn over the past four decades.
Cotality’s Home Value Index, published on Monday, recorded a 1.2 per cent fall in October, with Australia’s median house prices dropping to $884,855.
Further pressure could be on the way, with the Reserve Bank set to announce its latest interest-rate decision on Tuesday and economists widely expecting another increase.
The latest downturn is 6.7 per cent below the peak recorded in March, about a $63,400 decline in the median Australian dwelling value.
The value of homes across Australia’s capital cities has fallen 8.1 per cent in seven months, the speed of decline tracking at its fastest pace in the last 40 years.
Over the same number of months, the 2022 to 2023 downturn saw capital city values drop seven per cent.
The largest peak-to-trough decline on record occurred during the 2017–19 downturn, when capital-city values fell 8.2 per cent.
Brisbane and Perth overtook Sydney to record the sharpest monthly declines, falling two per cent and 1.7 per cent respectively in October.
Property prices across Australia have plummeted for a seventh month in a row (file image)
Cotality research director Tim Lawless said ‘virtually every suburb’ across the country’s major cities had recorded a drop in values
Values fell 6.1 per cent in Brisbane and 5.7 per cent in Perth over the quarter.
‘Virtually every suburb across Brisbane, Perth and Adelaide has recorded a drop in values over the past three months,’ Cotality research director Tim Lawless said.
‘The mid-sized capitals, where home values recorded extreme growth conditions over the past six years, are now well and truly in a correction.’
Sydney was close behind, with values dropping 1.6 per cent in October and 4.7 per cent over the quarter.
Mr Lawless explained interest rate hikes, cost-of-living pressures and the Federal Budget influenced the downturn in housing prices.
‘Affordability and serviceability constraints were the earliest factors weighing on housing demand,’ Mr Lawless said.
‘These headwinds [were] amplified by four interest rate hikes, persistently low confidence and ongoing cost-of-living pressures. The Federal Budget has added to the downside pressure since mid-May.’
Melbourne homeowners have also been hit, with values sitting 7.3 per cent below their level five years ago.
Australia is on track to record its fastest downturn in property value in the last 40 years (pictured, Cotality’s index results, published on Monday)
Home sales have also seen a sharp drop due to weakening demand across the country.
Cotality’s index report estimated that the number of home sales over the past three months was 23 per cent lower than a year ago and 18 per cent below the previous five-year average.
Sales activity recorded its sharpest declines in Sydney and Brisbane, falling 30 per cent and 29 per cent respectively compared with a year earlier.
Fewer buyers also meant selling conditions had deteriorated, with auction clearance rates across the combined capitals consistently tracking below 50 per cent.
The slower selling rate meant capital city listings had risen to the highest level for this time of year since 2019.
Fewer buyers meant homes were becoming harder to sell, with properties spending a median of 39 days on the market, the longest period since August 2020.
‘Buyers have a lot more stock to choose from, they have more leverage and there isn’t the same urgency to buy as there was a year ago when home values were rising rapidly,’ Mr Lawless said.
He added buyers would hold back from purchasing a home as yet another interest rate rise looms.
Reserve Bank of Australia Governor Michele Bullock (pictured) will announce the board’s interest-rate decision on Melbourne Cup Day
The Reserve Bank of Australia has lifted the cash rate by 100 basis points this year, taking it to 4.6 per cent.
If the RBA raises rates by an expected 25 basis points on Tuesday, the cash rate would increase from 4.60 per cent to 4.85 per cent.
For borrowers with a $600,000 mortgage, another hike would add about $92 to monthly repayments, on top of roughly $364 from this year’s four earlier increases.
Cotality estimated the average variable mortgage rate for owner-occupiers would rise to about 6.7 per cent if lenders passed on another quarter-point increase in full.
‘Another rate hike would mean borrowing capacity has dropped by around 11.5 per cent, or more than $105,000 through the rate-hiking cycle to date,’ Mr Lawless said.
‘More than offsetting the approximately $63,400 decline in the national median dwelling value since its March peak.’
The Reserve Bank board will meet on Monday and Tuesday before announcing its decision at 2.30pm on Melbourne Cup Day, about half an hour before the race begins.
Both the bond markets and most economists have backed a rate hike after hot inflation figures and hawkish commentary from governor Michele Bullock over the last month.
