‘Double whammy’ in play as property prices fall for six months straight

Owning a property is becoming increasingly difficult for many young people. Photo: TND

Owning a property is becoming increasingly difficult for many young people. Photo: TND Photo: TND

Australian property prices have fallen for the sixth month in a row, as rising interest rates push home values lower in nearly every market across the country.

National median property prices fell 1.2 per cent in October – bringing the total home value plunge since an April peak to 7.2 per cent, CoreLogic figures to be published on Tuesday reveal.

Brisbane led prices lower, with values falling 2 per cent across Australia’s third largest city, while price falls in Sydney (-1.3 per cent) and Melbourne (-0.8 per cent) continued to moderate.

But while the pace of price declines is falling amid the biggest rise in interest rates since the 1990s, CoreLogic’s Tim Lawless says it is still too early to say whether the worst is over.

“Australian borrowers [face] the double whammy of further interest rate hikes along with persistently high and rising inflation,” Mr Lawless said.

“There is a genuine risk we could see the rate of decline re-accelerate as interest rates rise further and household balance sheets become more thinly stretched.”

CoreLogic expects property prices will continue falling until interest rates peak, which markets expect will be over the first half of 2023.

However, it’s thought to be unlikely that values will fall more than the 25.5 per cent increase posted during the pandemic years.

Property downturn widens

The housing market downturn continued to widen in October, with every market, other than regional South Australia, posting lower values.

Some markets are holding up better than others, with property prices resilient across Perth (-0.2 per cent) and Adelaide (-0.3 per cent).

“At the combined capital city level, housing values have fallen -6.5 per cent following a 25.5 per cent rise through the upswing,” Mr Lawless said.

“Sydney home values are down -10.2 per cent since peaking in January (after a 27.7 per cent rise) and Melbourne values are down -6.4 per cent since February (after increasing 17.3 per cent).

Housing demand holds up

The number of houses listed for sale across the country has fallen off as values have plunged, with sellers staying out of the market in greater numbers.

The number of newly listed capital city dwellings listed was down 25.2 per cent in annual terms over October, and about 19 per cent below the five-year average, CoreLogic figures revealed.

But demand for housing has held up relatively well, Mr Lawless said, with sales still 3.8 per cent above the five-year average.

“Housing finance data shows subsequent buyers, such as upgraders, downsizers or movers, have been the most resilient sector of the market,” Mr Lawless said.

“As interest rates rise further, it’s likely sales activity will also trend lower as borrowing capacity is reduced.”

Rents rising

The pace of rent increases is also picking up as property prices fall.

CoreLogic said rents rose another 0.6 per cent in October nationally, led by a 1.1 per cent rise in unit rents, while house rents rose 0.5 per cent.

In annual terms, rents rose 13.7 per cent in Melbourne during October, and by 13.4 per cent in Sydney.

Although these increases are high, CoreLogic said the pace of rent rises is starting to ease heading into Christmas.

“A gradual slowdown in rental growth in the face of low vacancy rates could be an early sign that renters are reaching an affordability ceiling,” Mr Lawless said.

“Since the onset of COVID, capital city rents have risen 17.7 per cent and regional rents are up 25.5 per cent.

“Although rents are likely to continue to rise, it’s likely renters will be progressively seeking rental options across the medium- to high-density sector, where renting is cheaper, or maximising the number of people in the tenancy in an effort to spread higher rental costs.”

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