Capital city prices plummet amid a perfect storm
House prices across Australia’s largest capital cities have posted their steepest quarterly decline on record thanks to rising interest rates, spiking inflation and high levels of household debt, according to new data from Domain.
However, there are signs the worst may be over as the pace of interest rate hikes slowed this month and consumer sentiment rose, The Australian Financial Review reported.
“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,” Domain chief of research and economics Nicola Powell told AFR. “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.”
While there are signs of improvement, the impact of six rate increases and skyrocketing inflation was evident in the September quarter. Sydney’s house prices tumbled by 5.3%, while Melbourne and Brisbane fell by 4.3% and Canberra sank 5.8%, AFR reported.
Hobart prices fell by 2.6%, while Perth prices fell 1.5% and Darwin prices slid 3.9%. Across the combined capital cities, house prices fell by 4%.
Read next: Housing prices could tumble by 20% – RBA
“The initial shock of rising interest rates and exorbitant levels of inflation has had a severe effect on Australians, with the housing market bearing the brunt of this,” Powell said. “Interest rate hikes and strong inflation levels have damaged borrowing capacity and increased home loan costs, while today’s high household debt heightens the vulnerability of households to rising interest rates and could exacerbate a downturn.”
Unit prices in Melbourne also saw their largest quarterly decline on record, sliding 3.3%, AFR reported. They are now on track to slip below pre-pandemic levels in the next quarter. Canberra units posted their steepest quarterly drop in more than two years, falling 4.2%, while Perth units posted their fastest decline in 12 months with a 2.4% drop.
Adelaide bucked the trend, with house and unit prices posting quarterly growth of 0.6% and 2.5%, respectively.
