National Housing Prices Fall
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National Housing Prices Fall

It’s the first fall in prices recorded since September 2020.

By Terry Christodoulou
Wed, Jun 1, 2022 11:13amGrey Clock < 1 min

Housing markets have lost more steam in May as a combination of higher interest rates, inventory levels and lower sentiment —  dampened by conditions — saw the combined capitals house price index fall 0.3%.

The decline in house prices was led by, Sydney, with its house prices experiencing a 1% drop through May — the largest monthly decline since January 2019.

Sydney prices, including May’s result, have already fallen by 1.5% since February and with the slide in values budling momentum since the first month-on-month decline was recorded in February at 0.10% according to CoreLogic’s research director Tim Lawless.

“Through the previous downturn, which commenced in mid-2017, it took the Sydney market 15 months for the monthly rate of decline to reach 1 per cent, so we are seeing a sharper deceleration in market conditions,” he said.“The market is probably declining more rapidly due to a few factors, including higher levels of housing debt and higher interest rates, so households are likely to be more sensitive to higher mortgage rates and the sharp drop in consumer sentiment from previously high levels.”

Comparatively, Melbourne, which experienced a softer growth phase, has recorded a smaller peak-to-date decline of -0.8%, with housing values now 9.8% higher compared to the pre-COVID level.

Canberra, Australia’s second most expensive property market behind Sydney, has experienced nearly three years of consistent positive growth and although dwelling values increased 2.2% in the three months to May, softer house values and affordability constraints are likely to have had an impact.  Accounting for the marginal decline evident in May, Canberra housing values remain 37.9% higher vs. pre-pandemic levels.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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