Real estate prices fell 1.6 percent in August in the biggest drop since 1983.
Australian home prices experienced their biggest drop in 40 years in August, as rising interest rates and cost-of-living pressures slashed demand, threatening to undermine family wealth and confidence.
Figures from real estate advisory firm CoreLogic released Thursday showed that prices nationwide fell 1.6 percent in August compared to July, when they fell 1.3 percent. It was the largest monthly decline since 1983, and brought annual price growth down to 4.7 percent, compared to a peak of more than 21 percent late last year.
Sydney again led the decline with values diving 2.3 per cent in August and 2.5 per cent from the previous year, a world away from the 25 per cent gains they enjoyed during 2021.
The malaise also extended to other major cities, with Melbourne down 1.2 per cent, Brisbane down 1.8 per cent and Canberra 1.7 per cent. Overall, prices in the capitals fell 1.6% in August, falling 3.8% for the year.
Even regions are starting to falter as prices fall 1.5 percent, ending a pandemic-driven rally as people switch to rural living and more space.
CoreLogic’s director of research, Tim Lawless, noted that home prices are still comfortably above pre-pandemic levels, but that stock of stocks appears likely to shrink further.
“It’s hard to see home prices stabilize until interest rates find a ceiling and consumer confidence starts to improve,” Lawless said.
“From current levels, interest rates are likely to rise by at least another 75 basis points and there is a good chance that the reported inventory levels will build up during the spring selling season, providing more options for buyers and adding further downward pressure on housing values.”
The Reserve Bank of Australia (RBA) has already raised interest rates by 175 basis points since May, and is sure to raise again next week in an effort to contain rising inflation.
Markets are betting that the current cash rate of 1.85 per cent could approach 4.0 per cent by the middle of next year. Banks sharply raised borrowing costs on new fixed-rate mortgages and tightened lending standards.
The continued decline in prices would be a blow to consumer wealth given the notional value of the 10.8 million Australian homes estimated at A$10.2 trillion ($7.01 trillion).