The decline in Australia’s property market has spread to all capital cities and most regional areas, with a leading index showing the biggest monthly decline in nearly four decades.
Key points:
- CoreLogic index shows home values fell 1.6 percent in August
- The rival PropTrack index posted a smaller drop of 0.4 percent.
- Regional markets have started to fall, with almost the entire country now off their peak value
CoreLogic’s home value index fell 1.6 percent in August, the biggest national monthly drop since 1983.
A separate index, using a different methodology, from rival data provider PropTrack saw prices fall a much smaller 0.4% last month, but both indexes agree that nearly every city and region in Australia is now in a real estate recession.
CoreLogic data shows declines in all capitals except for Darwin, which posted a 0.9 percent rise in August.
“It’s just a sign of how extraordinary interest rate increases have been, as well as deterring buyers due to higher cost of living and lower consumer confidence,” CoreLogic’s Eliza Owen told The Business.
“It’s also important to remember that this was an extremely large increase in property values that increased by approximately 28 percent over the course of two years.”
The biggest falls continued to occur in Sydney, where prices fell 2.3% last month, while Brisbane (-1.8%), Hobart (-1.7%) and Canberra (-1.7%) had the next biggest drops.
Prices in Perth (-0.2 percent) and Adelaide (-0.1 percent) fell only slightly, while Melbourne posted a further 1.2 percent drop.
region reversal
Regional areas have also started to slide quite sharply, with CoreLogic posting a 1.5 percent drop outside of capitals.
“That is much stronger than what we have seen in previous months and is being led by some of the hottest lifestyle areas in the regions, such as Newcastle and the Richmond-Tweed area,” said Ms Owen.
PropTrack pegged the regional drop at just 0.3 percent last month and 1.2 percent in the last three, but that’s still enough to be the biggest quarterly drop in its index since 2011.
CoreLogic and PropTrack agree that regional South Australia is at a record high, with Adelaide just shy of it, while regional Tasmania is also seen at a record high by the latter data provider, but not the former.
According to CoreLogic, Sydney has seen the biggest recent decline since its COVID peak, 7.4% since January 2022, and Melbourne is down 4.6%.
Even though Darwin has been strong recently, houses are still 10 percent below their peak value reached in May 2014.
Desirable properties still for sale
While prices are falling rapidly overall, it’s still not stopping houses from changing hands.
At an auction in Melbourne last weekend, a large crowd gathered to watch half a dozen bidders compete for a renovated four-bedroom house in the suburb of Maribyrnong, which is just over 10 kilometers from the city center. .
Ahead of the auction, bidders ABC spoke with were undeterred by forecasts of rising interest rates and falling home prices.
“It’s definitely a concern, but I think we’re better placed so I’m happy we can afford it. [to buy]said the Rohini bidder, who is seeking to improve her family’s home.
“You have a beautiful river and you can see greenery everywhere, it’s a lively place, so why not?”
In the end, the auction was a contest between two other bidders and the property sold for $1,605,000, about $200,000 over the reserve, to an investor who lives nearby.
“Anything that’s move-in ready with homestay is still going about as well as what we were seeing six or 12 months ago, this falls into that category,” said Patrick Till, real estate agent and auctioneer for Nelson Alexander.
Potential buyers applaud falling prices
The beginning of the decline in house prices in Adelaide is positive for Sally Probert.
“I would certainly appreciate it,” Mrs. Probert said.
“Personally, I’m a little skeptical. I don’t think they’ll drop too much.”
The first-time homebuyer has been looking for a property for two years and, in that time, has seen prices skyrocket.
“One example is when I first moved over two years ago, I looked at a townhouse in a nice little complex and I didn’t have success, and it ended up costing around $495,000,” Probert said.
“Then, not even 12 months later, almost exactly the same townhouse in the exact complex when it was hovering around $600,000.”
Ms Probert’s mortgage broker, Belinda Sugars of Mortgage Choice, said that, for now at least, the Adelaide property market remained strong.
“Buyers still have to pay a lot of money, there are a lot of offers on a property. So it’s a seller’s market, no question about it,” he said.
But Ms Sugars said higher serviceability reserves imposed by banks on home loan applicants due to rising interest rates were beginning to reduce borrowing capacity.
“At the high end it could be $100,000 to $150,000 which [buyers] I have to back up,” Ms. Sugars said.
“But we’re pretty conservative in Adelaide about how high up we go when we buy property. They’re not looking for the biggest and best, they want to get something manageable.”
Eliza Owen said the drop in home prices was not absolute good news for prospective buyers as it is likely to result in a drop in the number of properties put up for sale over time.
“Sellers are not as inclined to sell their properties as prices drop,” he said.
“That means the speed at which new stocks come to market is starting to slow down.”
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