SYDNEY (REUTERS) – Australian home prices slid for a third month in July and the pace quickened as Sydney suffered its worst decline in almost 40 years amid rising borrowing costs and a cost-of-living crisis.
Figures from property consultant CoreLogic released on Monday (Aug 1) showed that prices nationally fell 1.3 per cent in July from June when they dropped 0.6 per cent. Prices were still 8 per cent higher for the year, reflecting huge gains made over 2021 and early 2022.
The weakness was concentrated in the capital cities, where prices dropped 1.4 per cent in July, while annual growth slowed to 5.4 per cent, having been above 20 per cent early this year.
The pullback in Sydney gathered momentum as values fell 2.2 per cent in the month, while Melbourne lost 1.5 per cent. Annual growth in Sydney braked to just 1.6 per cent, a long way from the heady days of 2021 when prices rose by a quarter.
CoreLogic research director Tim Lawless said that although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with that seen during the onset of the global financial crisis in 2008 and the sharp downswing of the early 1980s.
“In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years,” he said.
Other cities also started to see falls, with Brisbane off 0.8 per cent, Canberra 1.1 per cent and Hobart 1.5 per cent.
Even the regions started to cool as prices fell 0.8 per cent, ending a long bull run as people shifted to country living and greater space.
The retreat in part reflects higher borrowing costs as the Reserve Bank of Australia lifted rates for three months in a row and is considered certain to hike again this week in an effort to contain surging inflation.
Markets are wagering that the current 1.35 per cent cash rate could reach 3.4 per cent by the middle of next year. The major banks have also sharply raised borrowing costs on new fixed-rate mortgages and tightened lending standards.
A sustained drop in prices would be a drag on consumer wealth given that the notional value of Australia’s 10.8 million homes had risen A$210 billion (S$202.5 billion) in the first quarter alone to reach A$10.2 trillion.