The Sydney Neighbourhoods At The Forefront Of The Property Downturn
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The Sydney Neighbourhoods At The Forefront Of The Property Downturn

As interest rates rise some areas are feeling the pinch more than others.

By Kanebridge News
Thu, Jul 7, 2022 4:27pmGrey Clock < 1 min

 The upper end of Sydney’s property market is leading the downturn in home values according to the latest figures from CoreLogic.

Parts of the NSW capital’s inner west, Northern Beaches, eastern suburbs and inner-city recorded the largest decline in values over the past three months, as rising rates put downward pressure on pricing and reduce buyer borrowing power.

The rising cash rate has accelerated value falls in Sydney according to CoreLogic research director Tim Lawless. This was most acutely felt in the top end of the market, with the upper quartile down 4.3% while values for the bottom quartile fell only 0.5%.

Sydney property values were down by 2.8% across the board in the quarter and aer expected to fall further. The NAB downgraded its forecast last week, expecting prices to decline 8.8% this year and 13.4% in 2023. The Commonwealth Bank has forecast a decline of 18% by the end of 2023.

According to the latest CoreLogic figures, the Leichhardt SA3 region (covering suburbs such as Rozelle, Balmain and Birchgrove too), recorded the largest decline in house values, down 7.3% in three months.

Leichhardt’s area was followed by the Pittwater (-7.2%) and Warringah (-6.5%) regions, while the inner city and Strathfield, Ashfield, and Burwood regions also had values drop by more than 6%.

For units, it was slightly different where the largest falls were in the North Sydney and Mosman region — down 5.8%. The Manly and eastern suburbs regions — including the likes of Vaucluse, Bellevue Hill and Bondi — all recorded drops of more than 5%.

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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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