house prices
Source: Palo Cech from Pexels.
  • Rising interest rates and decades-high inflation have impacted the housing market
  • Rising migration likely to bolster investment activity
  • Declines were seen across all capital city markets, excluding Adelaide

Data from Domain has confirmed the downturn has gathered pace and spread geographically, with the September quarter recording the fastest quarterly decline on record.

The shock of steeply rising interest rates and decades-high inflation has severely impacted Australians, with the housing market bearing the brunt.

However, conditions are easing, with supply normalising from its record low, providing buyers with more diverse choice, and the opportunity to negotiate.

“We’re going through housing market conditions that many buyers and sellers have never experienced in their lifetime,” said Nicola Powell, Domain Chief of Research and Economics.

“The mix of interest rate hikes, strong inflation levels and high household debt has understandably had a significant impact on consumer sentiment.”

Dr Powell added that while prices are expected to fall further, data married with current economic indicators suggest that the September quarter will represent the 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.

Nicola Powell, Domain

nicola powell
Dr Nicola Powell, Domain. Image – LinkedIn .

“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.

“Until we see this play out, 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.”

Quarterly change of stratified median house and unit price

quarterly change
Source – Domain.

Sydney and Melbourne house prices at fastest decline on record

The data shows that both the Sydney and Melbourne market downturn gathered significant momentum on record, with both housing and in Melbourne’s case unit markets falling at their fastest rate on record at -5.5%, -4.3% and -3.3% respectively.

Commenting on Sydney’s housing market, Dr Powell said “Despite the fast pace of the falls, house prices are still $326,000 higher than they were before the pandemic property boom and would need to fall by a further 22.3% to erase all the growth seen. Unit prices have had their steepest fall in three years of 3.1% and are now 5.7% below the December 2021 price peak, down by about $46,000.”

In Melbourne, prices have made their first annual decline since 2019.

“Despite this, house prices are still $147,000 higher than they were before the pandemic property boom and would need to fall by a further 14.3% to erase all the growth seen,” she added.

“Unit prices have had their steepest quarterly fall on record (-3.3%) reversing all the positive growth seen last quarter putting unit prices on track to be lower than they were pre-pandemic over the next quarter if they continue to slide at the current rate of decline.

“That said, it follows a period of substantial underperformance of unit prices, which rose a modest 9% during the upswing compared with a 24% jump in house prices.”

Stratified Median House Prices

median house prices
Source – Domain.

Brisbane and Adelaide still recording growth

Although Brisbane house prices fell by 4.3% during the September quarter, the fastest quarterly pace in history, on an annual basis, house prices remain 13.3% higher than a year ago.

“Unit prices bucked the overall national downward trend and have outperformed houses for two consecutive quarters; this hasn’t happened since 2008,” added Dr Powell.

Adelaide is the only capital city market to record positive growth in both house (0.6%) and unit (2.5%) prices over the quarter, reaching record new highs.

“The upswing continues to lose steam as quarterly house price growth is the slowest since prices declined in mid-2020 and it’s the weakest outcome in a year for units,” she continued.

“Unit prices have outperformed houses for two consecutive quarters. It’s a trend that could continue as affordability constraints, reduced borrowing capacity, an extremely tight rental market and migration flows returning are expected to continue to support unit prices.”

Stratified Median Unit Prices

unit prices
Source – Domain.

Canberra, Perth, Hobart and Darwin all recording declines

Perth and the smaller city markets all saw house prices decline, with some at record levels.

Prices in Canberra are now at 6% below their December 2021 peak, or $70,000. Nonetheless, house prices are $320,000 higher than pre-pandemic.

In Perth, house and unit prices declined by 1.5% and 2.4% respectively. While Perth house prices peaked in June 2022, units are still – 15.5% below the June 2014 peak.

“However, house prices have consistently outperformed units as the growth rates are now heading in opposite directions annually, bucking the national trend. This divergence has driven a record price gap between property types – the only capital city to see this widen,” noted Dr Powell.

In Hobart, prices have declined for a second consecutive quarter – the first time this has occurred since 2014.

“However, house prices are still $238,000 higher than they were prior to the recent pandemic property boom and would need to fall by a further 32% to erase all the growth seen,” said Dr Powell.

“Hobart bucks the national trend to become one of only two cities to record quarterly unit price growth. The 2.9% quarterly increase reverses about half of last quarter’s fall.

“Despite the fluctuations, unit prices are still sitting substantially higher than what they were before the recent pandemic property boom – prices are still $118,000 higher – and would need to fall by a further 21.5% to erase all the growth seen.”

Lastly, the Darwin market’s decline has reversed all of the previous quarters growth – the steepest since the pandemic began.

Darwin is one of only two cities where house prices outperformed units, along with Adelaide.

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