House prices are dropping across Australia- but it’s not all good news
While the cost of living is rocketing skyward, house prices have gone into reverse – dropping for the first time in two years.
Corelogic’s home value index slipped 0.1 per cent in May – its first reverse since September 2020 – led by losses in Australia’s two largest markets, Sydney and Melbourne.
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The finance and property analyst’s monthly metrics show national dwelling values 14 per cent higher over the past 12 months but with the rate of price growth slowing from a peak of 22.4 per cent in the year to January.
Sales volumes are also starting to ease from recent highs.
In the 12 months to May, CoreLogic said there were more than 586,000 sales nationally, up 6.5 per cent on the previous year. But monthly sales in May were down almost 27 per cent on the same month in 2021.
Properties are also taking longer to sell.
In the three months to May, the median days on market for dwellings across the country was 28 – up from a recent low of 20 days.
Similarly, the proportion of sellers willing to discount has jumped from 2.9 to 3.3 per cent since late last year.
That doesn’t necessarily mean it’s a buyer’s market.
With the Reserve Bank lifting the official cash rate half a percentage point to 0.85 per cent – the biggest monthly jump in two decades – buyers have been left with less borrowing power and higher repayments.
In the worst position are those who have recently entered the market, with some even facing the possibility their loan could be worth more than their new home.
“Putting inflation pressure aside, the rise in the RBA cash rate will be translated into an increase in home mortgage interest rates,” RMIT property expert Peng Yew Wong said.
“Undoubtedly this will directly impact home borrowers as they will need to start paying a higher mortgage repayment.”
Logically, if inflation and rising rates are a double whammy for buyers and sellers alike, they can’t be good for builders.
With inflation running well ahead of expectations, the rate hike is a wake-up call for the economy, according to Master Builders Australia CEO Denita Wawn.
She understands the rationale behind the RBA decision but says there is also need to maintain economic growth to protect the construction sector as it deals with cost increases for products and labour.
“It is important the federal government makes use of both fiscal and monetary policy levers,” Ms Wawn said.
“Microeconomic reform must also be a focus.”
By this, she means reducing the cost of new homes by tackling issues like land supply, regulation and tax burdens.
Dwelling approvals declined for a second consecutive month in April, down 2.4 per cent, according to CoreLogic.
Lending for purchases also fell 6.4 per cent for the month.