Good news for first-home buyers

For the first time in a long time, house prices have dropped.

For the first time in a long time, house prices have dropped.

Those loud whimpers we've all been hearing in these final weeks of May is not the onset of winter, it was housing boom bursting.

Sorry for the negative news, negative gearers, but the market has recorded its first fall since the beginning of the Covid pandemic.

The first interest rate rise in more than a decade hasn't helped either. 

Last month, property prices fell 0.11% nationally, according to PropTrack’s latest Home Price Index, in what proved to be the first decline since April 2020 - the early, chaotic days of the pandemic.

It follows the news The Oz reported on Monday that property prices have fallen by hundreds of thousands of dollars in some inner city suburbs since January this year.

To be expected?

The result followed a continued slowing in price growth through the first few months of 2022 as ­affordability pressures were heightened by the threat of an ­interest rate rise. That became a ­reality in May when the Reserve Bank raised the cash rate to 0.35%.

PropTrack senior economist Paul Ryan said the slowdown meant home prices would have likely moved into negative territory regardless of a rate rise. 

He said further increases to interest repayments might impact buyer sentiment and willingness to place large bids for homes that could flow through to more falls through 2022. 

“The RBA definitely has more rate increases in mind,” Mr Ryan said. “They don’t operate by just tinkering at the margins – the board will discuss a path.

Welcome, finally, to first home buyers

“The uncertainty itself is kind of holding people back from bidding up as much as they potentially could. Obviously, sentiment can change quite quickly but the market seems like it's in a pretty good place now for buyers and sellers to come together.”

On an annualised scale, property prices are up 14% compared to the same time last year. Get this, almost half of that growth was reported six months ago (up 24%), which indicates a significant slowdown through the start of the year.

However, Mr Ryan said it was important to remember any declines ware against the back of the country’s fastest housing boom in decades, which saw prices climb 35% over the past 26 months.

Banking regulator APRA on Tuesday warned homeowners the country was moving into a “very different” housing environment compared to the past decade (yeah, no kidding), given we were moving out of a ­period of ultra-low rates and a soaring property market. Negative equity could soon become a reality for some borrowers.

APRA chairman Wayne Byers said the organisation had told some banks to pull their heads in for lending to home loan customers that who carry too much debt.

The reality of the changing market has hit home for borrowers already, with new research from Commonwealth Bank having found more than 90% of Australian homeowners have since taken steps to mitigate the impact of rising mortgage rates. 

Half of all capital cities recorded price falls through May.

And there is now a clear two-speed market playing out across the country.

Regional Australia held steady and good news for smaller cities around the country, the experts suggest the slow down won't hit the sides in places like Perth, Adelaide and Brisbane.

If now is the time for you to buy, see where house prices are falling the most in every state and territory in Australia here.