Property value decline loses momentum

Yasmine Raso

Senior Journalist, Financial Newswire

25 January 2023

Combined capital house prices have fallen six times slower in the December quarter compared to the previous September quarter as the Australian housing market “downturn” shows signs of relaxing, according to Domain’s House Price Report.

House prices combined across the capital cities have declined by 6.1 per cent or $66,000 from the March 2022 peak, despite still remaining over $200,000 higher than the mid-2020 trough during the COVID-19 pandemic.

Sydney, Brisbane and Canberra saw quarterly change of -2.1 per cent, -1.8 per cent and -0.3 per cent respectively, while Melbourne, Adelaide, Perth and Hobart saw prices stabilise and Darwin saw a 3.3 per cent increase.

“The spring selling season bore the brunt of interest rate shocks and sky-high inflation levels. This is why the September quarter saw house prices fall at their fastest quarterly rate,” Dr Nicola Powell, Domain’s Chief of Research and Economics, said.

“Sellers had been sitting on the sidelines to see how the housing market downturn unravelled and how high inflation and interest rates would land. The low flow of new homes coming on the market throughout spring and early summer has kept overall supply limited despite a drop in the number of sales. This tight supply is helping to keep prices stable.

“Now in the December quarter, the data suggests that the peak rate of the quarterly decline has passed as buyers have had time to adjust to the new norm of rising debt cost and reduced borrowing capacity. Based on calculations from Domain Home Loans, those with a $1 million mortgage are now paying almost $1,800 more on their loan than this time last year which has been a hard pill to swallow.

“While lingering weakness has persisted in the property market, the potential end of interest rates later this year will bring in more buyers and sellers, creating some green shoots for the months ahead. That doesn’t discount from an unsettled RBA environment and tight serviceability requirements which will take time for consumers to shake off.”

The report also reflected the rampant demand for units as Australia grapples with a cost of living and rental crisis, with unit price growth in Sydney, Brisbane, Adelaide and Darwin overtaking house prices.

“The property price falls and the state and federal government support schemes for affordability-challenged buyers, such as the NSW Government First Home Choice Scheme, is going to bring first-home buyers front and centre this year,” Powell said.

“For this reason, we’ll likely find that unit prices will hold firmer for market entrants as affordability constraints, reduced borrowing capacity, an extremely tight rental market and migration returning will continue to support demand.”