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Australia records the biggest drop in house prices in its history, as values in one city plunge 13 per cent, and we are a long way from the bottom.
- Australia records biggest drop in house prices, CoreLogic data shows
- Sydney values fell 13 percent from their highest point, 10 percent in Brisbane
- Experts say the market is enduring a ‘hangover’ from higher sales and activity in 2021
The Reserve Bank’s aggressive rate hike cycle has caused the biggest drop on record in the Australian property market.
The 8.4 percent drop in eight months between May 2022 and January 2023 is the deepest peak-to-trough drop on record for CoreLogic.
The decline exceeds the previous record drop between 2017 and 2019.
Home values in Sydney led the recession, falling 13 per cent from their peak.
Brisbane prices have plunged 10 per cent and Melbourne home values have plunged 8.6 per cent from peak to trough.
The 300 basis points in rate hikes have reduced the amount that buyers can borrow and have generally dampened buyer confidence.
Property prices have plummeted a record 8.4 percent drop in the last eight months (pictured, an auction in Melbourne)
High household indebtedness may have increased the housing market’s sensitivity to interest rates, CoreLogic’s head of research Eliza Owen said.
“Higher inflationary pressures, combined with increased post-closing spending, have also eroded household savings, which could be used for a home loan deposit,” it added.
The market may also be enduring a “hangover” from higher sales and activity in 2021 that left a gap in demand.
The market is unlikely to have bottomed out, and more cash rate increases of 3.1 percent are likely to continue to push prices lower in 2023.
Brisbane property values (pictured) have seen a 10 per cent decline since May 2022
Markets are pricing in a cash rate spike of around 4 percent, while economists’ forecasts average a more dovish 3.6 percent.
“Ongoing interest rate increases will further erode borrowing capacity and will likely prolong the country’s housing slowdown until interest rates stabilize,” Ms Owen said.
Weakening property prices and high construction costs continue to weigh on new construction projects, and home approvals fell 9 percent in November.
The key indicator of future activity in the construction industry has plunged 21.7 percent since August, marking the third straight month of lower council approvals.
Property prices in Sydney (pictured) led the recession by falling 13 percent from their peak.
November’s decline was led by the more volatile private terraced housing segment, which fell 22.7 percent. Approvals for private sector homes fell 2.5 percent.
Total home approvals fell in New South Wales, Western Australia, South Australia and Queensland, but rose in Tasmania and South Australia.
However, the value of non-residential building approvals remained strong, rising two per cent in November, the Australian Bureau of Statistics reported.
Home values in Sydney led the recession, falling 13 per cent from their peak. In the photo, auctioneer Karen Harvey at an auction in Hurlstone Park.