Australian Housing Prices Continue 5th Consecutive Month of Decline

A real estate sign is seen at property in Marrickville in Sydney, Australia, on Sept. 6, 2022. Lisa Maree Williams/Getty Images

Home values across Australia dropped for the fifth month in a row in September as interest rate hikes continued to affect the housing market.

According to real estate data provider CoreLogic, its national home value index fell 1.4 percent in September, following a 1.6 percent decrease in August.

Among the capital cities, Sydney saw the most significant drop in home values at 1.8 percent, followed by Brisbane at 1.7 percent and Melbourne at 1.1 percent.

While Perth and Adelaide reported slight decreases of 0.4 percent and 0.2 percent, respectively, Darwin’s housing values remained unchanged.

The reductions in house prices in the past five months were the direct result of the Reserve Bank of Australia raising interest rates aggressively from 0.1 percent to 2.35 percent to rein in inflation.

As markets expect the central bank to announce another rate hike at its next board meeting on Oct. 4, house prices across the country are predicted to continue their downward trend.

CoreLogic research director Tim Lawless said that although value drops had eased, the housing market outlook remained uncertain.

“It’s possible we have seen the initial shock of a rapid rise in interest rates pass through the market, and most borrowers and prospective home buyers have now ‘priced in’ further rate hikes,” he said.

“However, if interest rates continue to rise as rapidly as they have since May, we could see the rate of decline in housing values accelerate once again.”

A general view of apartments in the suburb of Zetland in Sydney, Australia, on Sept. 7, 2022. Lisa Maree Williams/Getty Images

Citing Sydney as an example, Lawless said the city’s home values went down by over $100,000 (US$64,000), or nine percent, since reaching their peak in January.

In some areas, such as the city’s wealthier Northern Beaches, house prices have fallen at least 14.5 percent since early 2022.

The director also said price drops were also noticeable in Brisbane, with home values decreasing by 4.3 percent, or $33,600, compared to the June 2022 peak.

“We are still seeing some resilience to value falls around the more affordable areas of Adelaide and Perth, as well as some regional markets associated with agriculture, mining and tourism,” Lawless said.

Rental Market Remains Competitive

Meanwhile, the rental market still grew in September, with average rents increasing by 0.6 percent.

CoreLogic property analyst Eliza Owen said that while rent growth was starting to slow down, prices were unlikely to drop anytime soon as vacancy rates remained low and immigration was picking up.

Owen told ABC radio that there was some evidence of landlords raising rents to cover higher costs of servicing a mortgage.

However, she noted there were several other factors contributing to price increases, including a drop in supply due to investors selling properties to cash in on price gains in 2021.

Likewise, Leanne Pilkington, deputy president of the Real Estate Institute of Australia, said there was a significant shortage of rental properties as many landlords chose to exit the market.

She warned that changes to legislation, such as the recent proposal to change land tax in Queensland—later overturned—could deter investors.