‘Balance of power has shifted’: House prices suffer steepest fall as market turns to buyers

• Combined capital city house prices fell 4.7 per cent, the steepest quarterly fall on record, according to new Domain data.
• House prices fell across every capital city for the first time in 15 years, and only the second time on record.
• Perth recorded the sharpest decline with house prices falling a record 7.4 per cent.

Economists say the “balance of power” has shifted towards buyers in Australia’s property market as prices suffer some of the largest three-month falls on record.

New data from Domain shows that in the September quarter, capital city house prices fell 4.7 per cent, marking the steepest quarterly fall that the property firm has recorded.

For the first time in 15 years, and only the second time in history, house prices fell across every capital city.

Perth suffered the sharpest drop, losing 7.4 per cent from its median house price, followed by Brisbane (down 5.4 per cent) and Sydney (down 4.7 per cent).

The correction was not limited to freestanding houses.

Unit prices fell 3.5 per cent, the steepest decline in 7.5 years, and unit prices retreated in all cities bar Darwin.

Domain’s Chief Residential Economist Dr Nicola Powell says for the first time in many years, power is transitioning to buyers.

“The balance of power has shifted towards buyers,” Dr Powell said.

“Homes are taking longer to sell, there is greater scope to negotiate, and sellers are having to be more realistic about price expectations.

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“For buyers with secure finances and the capacity to transact, that creates opportunities that have been difficult to find in recent years.”

Dr Powell said rising interest rates and other household costs meant buyers were unwilling to take on large mortgages and more likely to wait if they suspected prices would fall further.

“Australia’s housing market has entered a new phase in the downturn,” she said.

“Confidence has become one of the market’s biggest headwinds. Higher interest rates and persistent cost-of-living pressures are reducing how much buyers can borrow and their willingness to transact.

“When buyers expect prices could fall further, there is less urgency to act and greater incentive to wait. ”

According to Domain’s report, the median price of a freestanding home in an Australian capital city now sits just above $1.2 million, down more than $81,000 in the September quarter.

The median price of a unit, again across all capital cities, is $703,000, down $35,000 over the same three months.

Dr Powell said she expects prices to remain under pressure until the market has more certainty about the future of household budgets.

“The path to recovery will ultimately depend on both confidence and purchasing power,” she said.

“Until households have greater certainty around interest rates, living costs and policy settings, buyers are likely to remain cautious, and prices will remain under pressure.”