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  • Home prices continue to slide from +28.6% growth peak

Home prices continue to slide from +28.6% growth peak

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Australian property values fell by -1.3 per cent throughout July but remain well in the green since the market's low point early in the pandemic, according to CoreLogic's latest report. 

Five of the country's capital city markets experienced a drop in prices last month, while three saw positive price growth. With interest rates continuing to rise, the downturn is expected to continue into 2023. 

There may be positive news on the horizon though as forecasters say rates could be cut again next year. So what does it all mean for sellers in this market? 

National property prices: July 2022

Houses $816,659 Monthly change: -1.4%

Units $614,261 Monthly change: -0.9%

CoreLogic's report points out that the median Australian home grew in value by +28.6 per cent, or $169,670, from the pandemic low point to the market peak. A correction is now winding that growth back to some degree. 

July's -1.3 per cent dip has reduced the median Australian property price by around $4,500, making the current rate of decline similar to the downturn seen in the 2008 GFC.

MarketMonthQuarterAnnualMedian value
Combined capitals-1.4%-2.6%5.4%$819,80
Combined regional-0.8%-0.2%17.0%$600,105

Sydney home values fell fastest, dropping -2.2 per cent for the month, followed by Melbourne and Hobart with -1.5 per cent apiece.

Brisbane experienced negative growth of -0.8 per cent for the first time in nearly two years, while Adelaide — which has continued to boom throughout 2022 — dropped down to just +0.4 per cent in July. 

Perth and Darwin posted modest gains of +0.2 and +0.5 per cent respectively. Canberra, meanwhile, saw prices decline by -1.1 per cent. 

The regional markets held up stronger than the capital cities, with an overall price fall of -0.8 per cent. 

"The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5," CoreLogic's Head of Research Tim Lawless explained. 

"Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the GFC in 2008, and the sharp downswing of the early 1980s. In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years."

Stock on the market is still low, but listings should rise in spring

Winter is typically characterised by a slowdown in listings and market activity, 2022 has stuck to that trend. 

While new listings are up +6.5 per cent on the five-year average, total listings remain -25.1 per cent lower than that average, suggesting the market is still undersupplied. 

The 2022 winter has seen total listings edge back up towards average levels. Source: CoreLogic

It's expected that this year's spring selling season could push those numbers up significantly, though, putting downward pressure on auction clearance rates and extending selling times. 

"By late spring or early summer, we could be seeing advertised stock levels trend higher than normal," Mr Lawless said.  

"Based on the pre-COVID average, we have typically seen an +18.9 per cent rise in the number of new listings between the winter and spring seasons. 

"A more substantial flow of advertised stock against a backdrop of falling demand is great news for active buyers, who will have more choice and less urgency, but bad news for vendors, who could find selling conditions become more challenging as advertised stock levels rise."

As interest rates continue to rise, home sales are also predicted to slow as 2023 approaches, with buyers acting with more caution. 

Units outperform houses as affordability draws investors and first home buyers

As the downturn has started to accelerate, it's becoming clearer that units are holding their value more so than houses. 

This is in part to be expected as last year's boom was very much house-led, but there are a few factors that are making units a more appealing option to buyers right now. 

Houses +27.5% January - December 2021

Units +14.0% January - December 2021

Affordability pressures reached a breaking point some time ago in Australia's most expensive cities, and now with buyers facing reduced borrowing power, many are looking to units as a more viable option. 

"This trend is most apparent across the three largest capitals as well as Canberra, where housing affordability challenges may be deflecting more demand towards the medium to high-density sector," Mr Lawless said. 

"Additionally, firmer interest from investors should favour the unit market over houses where demand has historically been more concentrated."

Nationally, rental vacancy rates are down around 1 per cent and asking rents have risen close to +10 per cent annually. With prices now declining and rental demand set to be boosted even further by immigration, investors may return in force, helping to limit losses in the unit market.

Regional markets have declined for the first time since August 2020

Conditions in regional Australia have held stronger than the capitals for a number of months, but prices have finally dipped in July.

MarketMonthQuarterAnnualMedian Value
Regional NSW-1.1%-0.8%17.4%$741,544
Regional VIC-0.7%-0.5%12.7%$588,629
Regional QLD-0.7%0.1%19.0%$565,368
Regional SA1.14.222.5%$341,887
Regional WA0.1%0.9%8.4%$403,921
Regional TAS-0.6%0.4%19.2%$535,326
Combined capitals-1.4%-2.6%5.4%$819,880
Combined regional-0.8%-0.2%17.0%$600,105

The first overall regional price fall in 23 months has been led by NSW with a -1.1 per cent price reduction, followed by Victoria and Queensland posting losses of -0.7 per cent. 

Regional SA has retained its strength with gains of +1.1 per cent over the month, although that rate is slowing now too. 

Regional price growth has finally dipped into negative territory after months of outperforming the capitals. Source: CoreLogic

Despite the slipping prices, Mr Lawless pointed out that it's important to consider the wider context of these markets since the pandemic began. 

"Dwelling values across CoreLogic’s combined regionals index were up +41.1 per cent from the pandemic trough to the June peak, compared with a 25.5% rise across the combined capitals index," he said. 

"The stronger growth reflects a significant demographic shift towards commutable regional markets, which is likely to have some permanency as more workers take advantage of formalised hybrid employment arrangements."

What's next for the Australian property market? 

Inflation and interest rate hikes remain the driving force behind the current market downturn, and most forecasters say there's some way to go before rates hit their peak. 

Despite this, there is optimism around the cash rate being cut again at some point in 2023, which is good news for those seeking growth. 

"When interest rates start to stabilise, or potentially reduce next year, this could be the cue for housing values to find a floor," Mr Lawless explained. 

"Similar to the trajectory of the upswing, this downswing phase could be a short but sharp one, depending on how high and fast interest rate settings go."

With the spring selling season kicking off soon, total listings on the market may finally return to average levels, acting as a test of what buyer demand is really out there. 

It's still predicted that the peak-to-trough fall in prices could amount to 10 or 15 per cent, perhaps more. While this would be a significant hit to Australian property, it's unlikely to go far enough to wipe out the massive gains seen throughout this recent boom. 

Ultimately, every suburb, street and property is unique, so speaking to a top local agent to understand how your home will perform in the current market will help provide clarity in this time of change.