Real estate Australia: home prices suffer record fall

Australian home prices have plunged by the biggest margin since records began, as rapid fire interest rate rises play havoc with the market.

Aidan Devine

3 min read

October 27, 2022 - 5:00AM

News Corp Australia Network

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Australian home prices have plunged by the biggest margin since records began more than 40 years ago.

Prices nationally dropped by 4.1 per cent over the recent quarter, with some parts of the country recording even larger falls.

It was the biggest quarterly drop in home values since property research group CoreLogic began tracking price movements in 1980.

CoreLogic head of research Tim Lawless noted the Reserve Bank of Australia’s recent onslaught of interest rates rises was the main catalyst for the price drops.

The recent national drops in home prices were also substantially larger than those recorded during various other “market shocks” in the past.

National home prices have suffered a record fall. Picture: Newscorp- Daily Telegraph / Gaye Gerard

This included during the height of the global financial crisis in the September quarter of 2008, when the fall was 2.8 per cent.

The previous record for price falls over a quarter was recorded in early 1983, when the drop was 3.2 per cent.

Mr Lawless said the fact that the recent falls eclipsed those seen at various crisis points for the Australian economy highlighted the “sheer uncertainty” in the current market.

“Consumer sentiment is at recessionary levels and the last time rates were rising this quickly, debt levels relative to income were about half what they are now,” he said.

“If you go back to the 1980s, it was a period of volatility with a lot of shocks, financial crisis, recession … the recent price falls are bigger than they were then.”

Home prices would likely continue to drop until there was more certainty about when the Reserve Bank of Australia would stop pulling the trigger on rate rises, Mr Lawless said.

RBA boss Philip Lowe’s rapid fire interest rate hikes have had a devastating effect on the real estate market. Picture: NewsWire / Monique Harmer

The biggest price drops over the recent September quarter were recorded in Sydney, Melbourne and Brisbane, where prices are now well below their peaks of earlier this year.

The average Sydney home is now about $116,000, or 10.1 per cent, cheaper than it was in February, when prices last peaked.

Melbourne prices peaked in January and have fallen by 6.4 per cent since then, representing an average price drop of about $53,000.

Brisbane prices have fallen 6.1 per cent since peaking in June and the average home in the Queensland capital is just shy of $50,000 cheaper.

Adelaide and Perth prices also dropped, but the falls were less than one per cent.

Prices in every capital remain higher than they were prior to the start of the Covid pandemic in early 2020.

Marginal buyers are in retreat. Picture: Julian Andrews.

Data from PropTrack, which measures price movements through a different model to CoreLogic, showed September price drops were sizeable but not as severe nationally as during 2018.

But PropTrack’s modelling did point to the biggest regional price falls on record during the September quarter.

Brisbane price falls were the biggest recorded since 2011 at -1.49 per cent, according to the PropTrack research, while Hobart had the biggest drops since 2012 at -1.44 per cent.

PropTrack senior economist Paul Ryan agreed that interest rate rises were the main driver of the weaker market.

“Borrowing capacity is falling,” he said. “It will have a big impact on the marginal buyer and they are often the ones who set the prices.

“These would be buyers who were on the cusp of a purchase but who may not be able to enter the market now.”

Low unemployment and rising immigration means a housing market collapse is highly unlikely. Picture: NCA Newswire / Gaye Gerard

Mr Ryan added that low unemployment suggested a housing market collapse similar to what happened in the USA during the global financial crisis was “highly unlikely”.

“Property is still in demand and we don’t have enough housing for our population,” he said. “This is a financing issue. Prices have to adjust for buyers and sellers to start talking to each other.”