Australian house prices plummet the most in 40 years | Business and Economy

Property prices fell 1.6 percent in August, the steepest drop since 1983.

Australian house prices suffered their biggest drop in 40 years in August as rising interest rates and cost-of-living pressures dampened demand, threatening to undermine household wealth and confidence.

Figures from property consultancy CoreLogic released on Thursday showed prices nationwide sank 1.6 percent in August from July, when they fell 1.3 percent. It was the biggest monthly drop since 1983 and dragged down annual price growth to 4.7 percent, compared with a peak of over 21 percent late last year.

Sydney again led the retreat with shares sinking 2.3 per cent in August and down 2.5 per cent from a year earlier, a world away from the 25 per cent gains enjoyed during a bumper 2021.

The malaise also spread to other major cities, with Melbourne falling 1.2 per cent, Brisbane down 1.8 per cent and Canberra down 1.7 per cent. Overall, prices in capital cities fell 1.6 percent in August, down 3.8 percent on the year.

Even regions began to falter as prices fell 1.5 percent, ending a pandemic-fueled uptrend as people moved to country life and more space.

CoreLogic research director Tim Lawless noted that home prices were still comfortably above pre-pandemic levels, but that this capital cushion seemed likely to shrink further.

“It’s hard to see home prices stabilizing until interest rates hit a ceiling and consumer confidence starts to improve,” Lawless said.

“From current levels, interest rates are likely to rise by at least another 75 basis points and there is a good chance that announced stock levels will build up during the spring selling season, giving more options to investors. buyers and will add further downward pressure on home values.”

The Reserve Bank of Australia (RBA) has already raised rates by 175 basis points since May and is seen as certain to raise them again next week in an effort to contain rising inflation.

Markets are betting that the current 1.85 percent cash rate could move closer to 4.0 percent by the middle of next year. Banks have dramatically raised borrowing costs on new fixed-rate mortgages and tightened lending standards.

A sustained fall in prices would be a blow to consumer wealth as the theoretical value of Australia’s 10.8 million homes was estimated at A$10.2 trillion ($7.01 trillion).

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