Australian house prices are falling at their fastest pace since the global financial crisis, and market conditions are likely to “worse” as interest rates continue to rise, the research firm says CoreLogic real estate.
Key Points:
Economists predict Australian house prices could fall by 12 to 20 per centThe average property value fell by 8.5% during the GFCRents have increased by 9.8% in the past year
The latest data shows the country’s median property value has fallen 2 percent since the start of May, to $747,182 (a figure that includes houses and apartments).
“Although the housing market has only fallen for three months … the pace of decline is comparable to the start of the global financial crisis (GFC) in 2008 and the steep decline of the 1980s,” he said Tim, Director of Research at CoreLogic. without law
But it noted that, on average, prices had risen 28.6 percent from mid-2020 (the low point of the housing market during the COVID-19 pandemic) to April 2022 ( when domestic prices peaked).
Regional Australia saw an even bigger increase, with prices up 41.1% in two years, as smaller cities outside the capitals saw a huge influx of city dwellers looking for better lifestyles (as remote working became the new normal).
“In Sydney, where the decline has particularly accelerated, we are seeing the steepest fall in value in almost 40 years.”
Property prices in Sydney, Melbourne and Hobart fell sharply in July.(CoreLogic)
The average price in Australia’s most expensive city fell 2.2 per cent in July (bringing its quarterly loss to 4.7 per cent). Despite this, an average house in Sydney still costs around $1.35 million, while an average unit can fetch around $806,000.
Melbourne and Hobart also saw sharp declines, with prices in both cities falling 1.5% last month, while Canberra’s fell 1.1%.
Prices in Brisbane and regional Australia fell 0.8 percent (their first monthly decline since August 2020).
At the other end of the spectrum, Darwin, Adelaide and Perth were the only capital cities where prices actually rose in July (between 0.2 and 0.4 per cent). However, it has been a sharp deceleration since May, when the Reserve Bank began aggressively raising the cash rate from record lows.
“short and sharp”
“I think this slowdown will be similar to the global financial crisis in that it will be quite short and sharp,” Lawless told ABC News.
According to CoreLogic, Australia’s average property price fell by around 8.5 per cent over an 11-month period during the GFC.
Adelaide property prices rose by 3.6% in the past three months.CoreLogic)
Lawless said the property downturn was “accelerating” and he would not be surprised if “the current downturn is worse than what we saw during the GFC”.
He noted that the main difference is that governments and central banks are currently determined to withdraw trillions of dollars worth of stimulus, in a desperate attempt to reduce inflation (rather than injecting it into the global economy, as they did after the 2008 crisis).
Many analysts predict that Australian property prices will, on average, fall by 10 to 20 per cent (high to low), with the two most expensive cities Sydney and Melbourne likely to suffer the biggest falls.
But even if the worst-case scenario happens, it won’t dramatically improve housing affordability.
“If we saw a 15 percent fall in national house values, prices would be back to where they were by April 2021.”
How quickly (and by how much) prices fall will depend on how aggressively the RBA decides to lift its cash rate target in the coming months.
Tenants in Brisbane and Adelaide are experiencing the strongest rent increases.CoreLogic)
Since May, the RBA has raised its cash rate target from 0.1 to 1.35 percent.
If the central bank delivers another double-sized rate hike on Tuesday (0.5 percentage point), as widely expected, that would push the new cash rate up to 1.85 percent.
Buyers market and rising rents
“The market has gone much more in favor of buyers than sellers, particularly in markets like Sydney and Melbourne,” Lawless said.
“Buyers are back in the driver’s seat. They have more options and less urgency.
“But for sellers, it means that they have to be much more realistic about their price expectations and should expect that there will be more negotiation.”
Renters are also at a disadvantage in today’s housing market. As home owner mortgage payments rise (and more foreign workers and students) return to Australia, rents have risen rapidly.
“Rental markets are extremely tight, with vacancy rates around 1% or less in many parts of Australia,” Lawless added.
“If you look at the history of rents, it’s very rare to see house rents increase at more than 3-4% a year.”
But in the last quarter, the national average rent rose 2.8 percent, and has risen nearly 10 percent in the past year.
Looking ahead, Mr Lawless said tenants may be under increasing pressure to rent spare rooms to more roommates, seek cheaper rents in apartments (rather than houses) or “stay at home with mom and dad more time.”
“There are definitely going to be some negative social outcomes from such high rents, which show no sign of abating at the moment.”
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