Australia's property market is experiencing its steepest decline in four decades, marked by seven consecutive months of falling prices. In October, the Cotality Home Value Index recorded a 1.2% decrease, bringing the median house price to $884,855. The cumulative drop since March, when prices peaked, now stands at 6.7%, representing a loss of approximately $63,400 in median dwelling value.
Across the nation's capital cities, home values have fallen 8.1% over the past seven months, a rate of decline outpacing any previous downturn in the last 40 years. This current downturn has surpassed the 7% drop observed in capital city values during the 2022-2023 period and is nearing the record 8.2% decline seen between 2017 and 2019.
October saw particularly sharp monthly declines in Brisbane and Perth, which dropped 2% and 1.7% respectively. Over the quarter, Brisbane's values fell 6.1% and Perth's declined 5.7%. Tim Lawless, Cotality's Research Director, noted that "virtually every suburb" in Brisbane, Perth, and Adelaide has seen values decrease in the last three months. He described these mid-sized capitals, which experienced substantial growth in recent years, as now being "well and truly in a correction."
Sydney followed with a 1.6% decrease in October and a 4.7% drop over the quarter. Lawless attributed the housing price downturn to a combination of rising interest rates, cost-of-living pressures, and the Federal Budget's impact since mid-May. He explained that "affordability and serviceability constraints were the earliest factors weighing on housing demand," which were then amplified by "four interest rate hikes, persistently low confidence and ongoing cost-of-living pressures."
Melbourne homeowners have also felt the impact, with values currently 7.3% below their level of five years ago.
Home sales have also declined sharply due to weakening demand nationwide. Cotality estimates that sales volumes in the past three months are 23% lower than a year ago and 18% below the previous five-year average. Sydney and Brisbane recorded the most significant drops in sales activity, falling 30% and 29% respectively compared to the previous year.
With fewer buyers in the market, selling conditions have deteriorated, leading to auction clearance rates consistently below 50% across combined capitals. Listings have increased to their highest level for this time of year since 2019. Properties are now spending an average of 39 days on the market, the longest duration since August 2020. Lawless commented that buyers "have a lot more stock to choose from, they have more leverage and there isn't the same urgency to buy as there was a year ago."
The Reserve Bank of Australia (RBA) is expected to announce its latest interest rate decision on Tuesday. Economists widely anticipate another 25-basis-point increase, which would bring the cash rate from 4.6% to 4.85%. Such a hike would add approximately $92 to monthly mortgage repayments for a $600,000 loan, on top of the roughly $364 increase from earlier rate rises this year. Cotality estimates that a further rate hike would reduce borrowing capacity by around 11.5%, or more than $105,000, throughout the current rate-hiking cycle.
