Australia’s housing downturn enters its sixth month

This year’s aggressive interest rate hikes continue to eat into Aussie property prices, with almost all capital cities and rest-of-state regions recording a drop in housing values last month.

According to property research firm CoreLogic, national dwelling values dipped -1.2 per cent in October, marking the sixth consecutive month that prices have fallen. 

Some states have fared worse than others, with price drops easing in Sydney (-1.3%) and Melbourne (-0.8%) but picking up pace in Brisbane (-2.0%).

Certain rest-of-state regions have also been hit particularly hard, with declines greater than 1 per cent recorded in regional NSW (-1.7 per cent), regional Victoria (-1.4 per cent) and regional Queensland (-1.3 per cent).

According to CoreLogic research director Tim Lawless, it’s still too early to tell if the worst of the downturn is behind us.

“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,” he said.

Capital city dwelling values (Source: CoreLogic)

So far, however, the below average number of new properties going to market has helped moderate the downturn. Over October, new capital city listings were down -25.2 per cent compared to last year and almost -19 per cent below the previous five-year average.

“Although we are now seeing a late spring response to freshly advertised supply, every capital city except Darwin is recording a lower than average flow of new listings added to the market over the past four weeks,” Lawless said.

“The low number of freshly advertised properties is probably helping to contain price falls to some extent. So far we haven’t seen any evidence of panicked selling or forced sales.”

Prices have also been supported by a favourable labour market and the glut of savings borrowers had accumulated over the pandemic period. 

Many on fixed rate loans have also been unaffected by the latest batch of rate hikes.

Across Australia, unit values have been falling at a much slower pace than houses (-4.2 per cent compared to -7.2 per cent), which Lawless attributes to the relative affordability which still characterises the medium to high density sector.

“The gap between median house and unit values increased to record levels through the COVID upswing. With borrowing capacity being hit hard as interest rates rise, it’s likely more housing demand has been diverted towards more affordable sectors of the market,” he said.

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