Property values fall under weight of interest rate rises
Rising interest rates are weighing heavily on the Sydney and Melbourne property markets, with the country’s two largest cities leading the rest of the capitals for home value price falls.
Rising interest rates are weighing heavily on the Sydney and Melbourne property markets, with the country’s two largest cities leading the rest of the capitals for home value price falls.
Sydney prices slid 0.7 per cent in July – and have dropped 3.4 per cent since they peaked in February – while Melbourne prices were down 0.59 per cent, new PropTrack data shows.
But the falls – ahead of another expected cash rate hike by the Reserve Bank on Tuesday – are likely to extend beyond this year, as the threat of rising mortgages keeps buyers away.
“We’ve persistently seen the biggest slowdown, and the largest falls, in the most expensive markets,” said PropTrack’s senior economist Paul Ryan.
“Borrowers in these markets tend to take out larger mortgages relative to their income so the spectre of higher interest rates weighs more heavily. It is partly the interest rate increases that have already happened, the fastest increase since 1994, as well as the uncertainty how high borrowing rates will be later in the year.”
PropTrack expects property prices to fall by between 2 per cent and 5 per cent across the country by the end of December, and a further 7 to 10 per cent in 2023.
Despite the pessimistic outlook, some realtors said there was still plenty of interest at auctions across the country at the weekend.
Ray White, one of the largest real estate groups, recorded a 65 per cent clearance rate – up from 54 per cent the previous weekend.
The PropTrack figures show Sydney property prices have risen 2.5 per cent in the past 12 months – and remain 26.9 per cent above their March 2020 levels, at a median of $975,000.
Adelaide and Perth were the only two capitals to show a rise in prices in July, both up 0.04 per cent, taking the median value to $634,000 and $534,000 respectively.
Brisbane prices eased 0.1 per cent in July, but have still recorded a 21.26 per cent rise in the past 12 months, the PropTrack figures show.
Jodie Price and Nathan Coleman took their family home, in the inner-city Brisbane suburb of Bardon, to auction on Saturday with a price guide of some $2m.
Things have changed somewhat since Ms Price and Mr Coleman purchased what will be their new home near Byron Bay, on the NSW north coast, earlier this year.
“To be honest we would never sell our house if we were staying in Brisbane because we love it so much … but we are following our dream to go and live in the Byron hinterland,” said Ms Price.
“We bought land and we bought that when it was really crazy. The market was hectic, it was pretty full on to buy during that time. We couldn’t even think about it for more than a day or we would have lost it.” In hindsight, Ms Price said, it “probably would have been better to sell at that time”.
Still, late on Sunday, five interested parties were wrangling with the agent, Ray White’s Judi O’Dea, for the six-bedroom, four-bathroom Bardon property.
“The buyers are still around, it’s not as if they have disappeared,” said Ms O’Dea. “Buyers have a little bit of shell shock, they aren’t doing much until they know what the market is going to do, but while they are not necessarily putting their hands up at the auction, I’ve now got to negotiate behind closed doors because there is plenty of interest.”
“We have seen incredible increases here, even if the market has come back a little,” she added.
“No one is ringing the bell at the bottom of the market, so this could be a brilliant opportunity and things in spring and summer could go back up again.”
Outside Brisbane, the Gold Coast and the Sunshine Coast posted bigger losses than much of the rest of regional Australia.
Regional Victoria, down 0.32 per cent in July, was the worst non-metropolitan area of the country, the PropTrack figures show. Combined regional areas fell 0.18 per cent in July and are 0.5 per cent below the price peak set in April 2022.
“We’re expecting prices to continue to fall throughout the rest of the year and into next year,” said PropTrack’s Mr Ryan.
“The rate of falls are to continue at this pace, roughly 0.5 per cent a month, until the RBA pauses and assesses the impact on the economy.”
More Coverage
When the hurricane relief worker turns out to be a neo-Nazi
The contentious US presidential race that has sharply politicised the storms is providing a new opening for hate groups that were already on the rise.
Plans dashed, but Seymour’s star still rising
Richlister Kevin Seymour still reckons his boom pacer Leap To Fame will etch his name in the record books despite missing a crucial race with a virus.