House prices in capital cities in the fastest quarterly decline

Oksana Patron

27 October 2022

The combination of initial shock of rising interest rates, growing inflation and high household debt in the September quarter saw housing market conditions “that many buyers and sellers have never experienced in their lifetime”, according to Domain House Price Report.

This means that house prices across the combined capitals are now 4.9% below the March 2022 price peak, down by about $53,000 and they would need to fall by a further 21.3% to erase all the growth seen during the pandemic boom.

At the same time, unit prices across the combined capitals are now 3.9% below the December 2021 price peak, down by about $24,000, and they would only need to fall by a further 5.2% to erase all the growth since the mid-2020 price trough, according to the report.

On top of this, a shifting trend towards units from buyers who had previously been focused on houses throughout the upswing continued and saw unit prices outperform houses across the combined capitals, Sydney, Melbourne, Brisbane, Adelaide, Canberra and Hobart.

While regional areas and the more affordable capital city of Adelaide remained Australia’s strongest housing markets, house prices in Sydney, Melbourne, Brisbane, Canberra and the combined capitals were in the fastest quarterly decline on record.

At the same time, Perth and Darwin were the only cities to see house prices hold firmer than units and Adelaide was the only capital city to record positive growth and reach record highs in house and unit prices.

“While prices are expected to continue to fall further, our data married with the current economic indicators show it is likely that the September quarter could be a peak quarterly decline. We’ve started to see the RBA ease the pace of interest rate hikes which has helped to shift the tone of what we can expect for the rest of the year, along with rising auction clearance rates and consumer sentiment improving from its low,” Dr. Nicola Powell, Domain Chief of Research and Economics, said.

“With rising overseas migration and short-term visa holders returning, we should start to see an improvement in investment activity which, in time, will provide more rental opportunities. However, prospective buyers will continue to stick to a more conservative approach by forward planning for any further rate hikes and being mindful of their lower borrowing capacity.”