‘Sharpest slowdown in more than 30 years’: House prices continue to see widespread falls

Australian house prices have continued to see widespread falls in June as interest rate hikes spark the “sharpest slowdown in more than 30 years”.

Australian house prices continued to see widespread falls in June as interest rate hikes spark the “sharpest slowdown in more than 30 years”, a new report says.

PropTrack’s latest Home Price Index released today shows national home prices fell 0.25 per cent nationally last month, with continued falls in Sydney, down 0.4 per cent, and Melbourne, down 0.61 per cent.

Prices in Brisbane also fell for the first time more than two years – since April 2020 – with a slight decline of 0.09 per cent, but the Queensland capital is still the country’s strongest market over the year.

Nationally, prices are still up 34 per cent since March 2020.

“While prices are down only 0.55 per cent from their peak in March 2022, an outsized rate hike in early June and expectations of much higher rates later in the year continues to slow all markets, with widespread falls seen in June,” the report says.

“The two-speed housing market remains evident. The biggest slowdowns have been in the most expensive markets of Sydney, Melbourne and the ACT. Affordable, lifestyle regions of Brisbane, Adelaide, regional QLD and Tasmania have continued to grow, but the slowdown is spreading to these markets, with Brisbane posting its first small fall since the pandemic began.”

PropTrack’s latest Home Price Index shows national home prices fell 0.25 per cent last month.

Regional areas have continued to outperform the capitals, according to PropTrack, with prices up 50 per cent since the start of the pandemic and sitting at a price peak.

Some regional markets declined in June, however, with regional NSW down 0.02 per cent and regional Victoria down 0.13 per cent.

As homeowners brace for another cash rate increase at the Reserve Bank’s July meeting next Tuesday, economists are warning of a major house price correction of up to 30 per cent.

“Conditions in the housing market have slowed rapidly, marking the sharpest slowdown in prices in more than 30 years,” the PropTrack report said. “We expect continued price falls across the country until the uncertainty about the extent of interest rate increases is resolved – likely extending beyond 2022.”

In a bid to tackle skyrocketing inflation, the RBA raised the cash rate target by 25 basis points in May to 0.35 per cent, the first increase since 2010.

That was followed this month by a shock 50-basis point increase, bringing the cash rate to 0.85 per cent.

RBA governor Philip Lowe last week sought to calm fears, saying a 75 basis-point increase was “not on the table” this time.

Prices are still up 34 per cent since March 2020.

Speaking at a UBS panel discussion in Zurich, Dr Lowe said the central bank would likely consider “graduated steps”, meaning an increase of 25 or 50 basis points points was on the cards.

Dr Lowe’s latest comments seems to have poured cold water on suggestions the official cash rate would reach 4 per cent in 2022, as to do so, the RBA would have to announce at least one 0.75 percentage point hike.

But he acknowledged the RBA only had a “narrow path” to rein in runaway inflation without in turn causing an economic downturn.

“There is a path there to have inflation come down without the economy having too much pain, but it’s a narrow path,” Dr Lowe said.

In an interview with ABC’s 730 earlier this month, Dr Lowe defended his past statements that rates would not rise before 2024, saying “the economy didn’t evolve as we expected”.

“What would you say to people watching who feel rattled because they think, ‘Well, I made borrowing decisions based on what was said last October and now it’s changed so I feel stressed, I feel worried about where it’s going’?” host Leigh Sales asked.

“I understand that people will make borrowing decisions based on our communication, and people took out loans that they may not have otherwise taken out,” Dr Lowe replied.

“I also point to the fact that the economy’s done remarkably well. The unemployment rate is at a 50-year low, a higher share of the population has a job than ever before, households have built up very large financial buffers. Over the past couple of years people have put away an extra $250 billion – it’s a lot of money, and the saving rate is still high, and the number of people who’ve fallen behind in their mortgages is actually declining, not rising.”

Sydney prices are now 1.5 per cent down from their February 2022 peak.

He added, “So there‘s a lot of resilience in the household sector. At the individual level, some people have taken out loans that they may not have wanted to take in retrospect, but the overall picture, which is really very much the focus of the Reserve Bank, is of a pretty resilient economy.”

Earlier this month, official figures confirmed the total value of Australia’s residential housing market passed $10 trillion for the first time.

Australian Bureau of Statistics data showed the value of the country’s 10.8 million residential dwellings rose by $221.2 billion in the three months to March 2022, bringing the total to $10.2 trillion.

The $10 trillion milestone, officially confirmed by the ABS in its quarterly release, was noted by finance experts who warned the ratio of Australia’s residential land value to GDP had now exceeded Japan’s record of 330 per cent at the height of the 1989 bubble.

PROPTRACK HOME PRICE INDEX

Sydney: “Sydney home price growth fell again in June. Prices are now 1.5 per cent below the peak seen in February 2022, with annual price growth at the slowest rate since October 2020. Expected interest rate increases may be weighing more heavily on growth in Sydney, the most expensive market, where the median house is still worth over $1.25 million.”

Melbourne: “Home prices in Melbourne fell for the fourth consecutive month in June, with prices now down more than 1 per cent from the peak in February 2022. Price growth has slowed considerably since mid-2021. Prices are now up only 5 per cent over the past year, the least of any capital city market. Melbourne’s median house value is now just above $900,000.”

Brisbane: “Brisbane prices recorded a slight fall in June, ending the city’s exceptional run of growth since April 2020, which has seen prices increase by almost 50 per cent. Despite this monthly result, Brisbane is still the strongest market over the past year, up by 24 per cent, and looks set to continue to outperform other markets over the coming period.”

Adelaide: “Adelaide continues to see solid growth, with prices up a further 0.42 per cent in June to reach a new price peak. Prices increased by 23 per cent over the past year in Adelaide, the second strongest capital city market after Brisbane. Adelaide continues to have the most momentum of any city market.”

Perth: “The Perth market has continued to grow slowly throughout 2022, posting slight growth in June. Price growth has continued at an annual pace of around 9 per cent, with little of the slowdown seen in other markets. As a result, combined dwelling prices are at their peak, though unit prices have continued to fall across the city.”

Hobart: “Although price growth is now slowing in Hobart, it remains one of the top performing markets across the country. Prices are up 17 per cent over the past year and are currently at peak levels.”

Darwin: “Darwin prices continued to increase at a slow pace in June. Conditions appear to be stabilising in Darwin after rapid slowing in late 2021. Prices are up by less than 7 per cent in the city over the past year.”

ACT: “Prices in the ACT fell again in June. Price growth has slowed rapidly in this market, with the annual pace of growth halving from above 30 per cent in late 2021 to 15 per cent now. With price levels in our nation’s capital higher than all capital cities apart from Sydney, stretched affordability may weigh on price growth over the coming period as interest rates increase.”

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– with Alexis Carey