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OtherTed TabetThu 01 Sep 22

House Price Decline Worst in 40 Years

House Price Decline Worst in 40 Years

Every capital city apart from Darwin is now firmly in the grips of a housing downturn after the biggest monthly decline in housing values since the early 1980s.

According to Corelogic, Sydney has continued to lead the downswing, with values falling 2.3 per cent over August while weaker conditions in Brisbane have since accelerated sharply with values falling 1.8 per cent.

Corelogic research director Tim Lawless said Brisbane’s shift into decline had been acute after almost two years of sustained growth due to record high internal migration and relative affordability.

“It was only two months ago that the Brisbane housing market peaked after recording a 42.7 per cent boom in values,” Lawless said. 

“During the past two months, the market has reversed sharply with values down 1.8 per cent in August after a 0.8 per cent drop in July.”

The big four banks had been tipping Brisbane house prices to tick up by as much as 10 per cent this year before winding back by -8 per cent next year.

Although Sydney prices fell by 2.3 per cent over the month and Melbourne was down by 1.2 per cent, their rate of decline appeared to be stabilising.

Nationwide, house prices dropped by 1.6 per cent with Adelaide slipping by 0.1 per cent, Perth by 0.2 per cent, and Hobart and Canberra by 1.7 per cent each.

Change in dwelling values


MonthQuarterAnnualMedian
Sydney-3.3%▼-5.9%▼-2.5%▼$1,066,493▼
Melbourne-1.2%▼-3.8%▼-2.1%▼$782,053▼
Brisbane-1.8%▼-2.5%▼17.5%▼$762,284▼
Adelaide-0.1%▼1.6%▼21.8%▼$652.284▲
Perth-0.2%▼0.4%▼4.9%▼$561,781▲
Hobart-1.7%▼-3.3%▼5.8%▼$714,370▼
Darwin0.9%▲2.3%▲6.3%▲$512,531▲
Canberra-1.7%▼-2.6%▼6.3%▼$909,748▼

^Source: Corelogic - August 2022

Total advertised stock in Sydney and Melbourne has now risen to above-average levels with other capitals expected to follow suit as listings rise through spring and demand continues to taper.

Lawless estimates the number of home sales over the three months to August was 14.8 per cent below the same period a year ago but said larger declines were evident across Sydney and Melbourne.

“Between winter and spring we typically see a 22 per cent rise in the number of new capital city listings based on the pre-Covid five-year average,” Lawless said.

“The flow of new listings this spring season may not be quite as active with the housing downturn dissuading some prospective vendors, but we are likely to see more listings added to the market than in winter.

“At the same time, we are expecting to see less buying activity as higher interest rates and low sentiment continue to weigh on demand. Should this scenario play out, the net result will be an accumulation of advertised supply that could further weigh down values.”

AMP Capital chief economist Shane Oliver said low demand because of rising interest rates and inflation remained the key drag for house prices, but more homeowners could be forced to sell early next year as they feel the impact of multiple rate rises.

Meanwhile, Lawless said he expects the downturn will continue to play out through the remainder of the year, and possibly into 2023.

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” Lawless said.

“From current levels, interest rates are likely to increase by at least another 75 basis points and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values.”

Over those 30 years, there have been six distinct cycles of growth and an equal number of cycles of decline, including the current downswing.

Each of the upswings and downturns was characterised by different environments and catalysts of change such as taxation policy, monetary policy decisions, economic shocks, fiscal stimulus and broader economic conditions.

While housing values move through cycles of growth as well as declines, the long-term trend is undeniably upwards. House prices have increased by almost 400 per cent over the past 30 years rising by 5.4 per cent on average since July 1992.

OtherAustraliaReal EstateOther
AUTHOR
Ted Tabet
The Urban Developer - Journalist
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Article originally posted at: https://www.theurbandeveloper.com/articles/house-price-decline-australia-corelogic-research-august-2022