Australian house prices fall at ‘fastest pace’ since 2008 financial crisis

House prices in Australia are falling at their fastest pace since the global financial crisis – and market conditions are ‘likely to deteriorate’ as interest rates continue to rise, the analyst firm says CoreLogic real estate.

The latest data shows that the country’s median property value has fallen 2% since the start of May, to $747,182 (a figure that includes homes and apartments).

“Although the housing market has only been down for three months … the rate of decline is comparable to the onset of the global financial crisis (GFC) in 2008 and the sharp decline of the early 1980s,” said CoreLogic’s research director, Tim. Without faith or law.

But he noted that, on average, prices jumped 28.6% between mid-2020 (the housing market low point during the COVID-19 pandemic) and April 2022 (when national prices peaked). Mountain peak).

Regional Australia saw an even bigger rise, with prices up 41.1% in two years – with smaller towns outside the capitals seeing a massive influx of city dwellers seeking a better way of life (remote work having become the new norm).

“In Sydney, where the downturn has particularly accelerated, we are seeing the biggest decline in value in nearly 40 years.”

House prices in Sydney, Melbourne and Hobart fell sharply in July.(CoreLogic)

The median price in Australia’s most expensive city fell 2.2% in July (bringing its quarterly loss to 4.7%). Despite this, an average house in Sydney still costs around $1.35 million, while an average unit can fetch around $806,000.

Melbourne and Hobart also saw steep declines, with prices in the two cities down 1.5% last month, while prices in Canberra fell 1.1%.

Prices in Brisbane and the Australia region fell 0.8% (their first monthly decline since August 2020).

At the other end of the spectrum, Darwin, Adelaide and Perth are the only capitals where prices actually rose in July (by 0.2 to 0.4%). However, this is a marked slowdown since May, when the Reserve Bank began aggressively raising the cash rate from historically low levels.

“Short and Sharp”

“I think this downturn will be similar to the global financial crisis in that it will be quite short and sharp,” Lawless told ABC News.

The median house price in Australia fell around 8.5% over an 11-month period during the GFC, according to CoreLogic.

Line chart showing property prices in Adelaide have jumped 3.6% in the past three months, while prices in Sydney have fallen 4.7%.
Property prices in Adelaide have jumped 3.6% in the past three months.(CoreLogic)

Mr Lawless said the housing downturn is “accelerating” and he would not be surprised if “the current decline worsens compared to what we saw at the GFC”.

He noted that the main difference is that governments and central banks are currently determined to withdraw billions of dollars of stimulus, in a desperate attempt to reduce inflation (instead of injecting it into the global economy, as they did after the 2008 crisis).

Many analysts are predicting that Australian house prices will fall by an average of 10-20% (from peak to trough) – with the two most expensive cities, Sydney and Melbourne, likely to suffer the biggest declines.

But even if the worst-case scenario occurs, it will not significantly improve housing affordability.

“If we saw, for example, a 15% drop in national housing values, that would bring prices back to where they were around April 2021.”

The speed (and extent) of the fall in prices will depend on how aggressively the RBA decides to raise its cash rate target over the next few months.

Chart showing that house rents have risen sharply in all capitals, with Brisbane jumping 13.6% last year.
Tenants in Brisbane and Adelaide are seeing the biggest rent increases.(CoreLogic)

Since May, the RBA has raised its cash rate target from 0.1% to 1.35%.

If the central bank makes another double rate hike on Tuesday (0.5 percentage points), as is widely expected, it would take the new key rate to 1.85%.

Buyer’s market and soaring rents

“The market is now much more in favor of buyers than sellers, especially in markets like Sydney and Melbourne,” Mr Lawless said.

“Buyers are taking the driver’s seat back. They have more choice and there is less urgency.

“But for sellers, it means they have to be a lot more realistic about their price expectations, and they should expect more negotiation.”

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