Domain June price report
Image – Canva
  • Combined capitals median house price has fallen by 0.9%, first decline in two years
  • Sydney and Melbourne markets most impacted, with quarterly changes of -2.7% and -0.9%
  • Inflation and cash rate hikes major factors in market cooldown, though unlikely to be dire concerns for most households says Dr Powell

The Australian market is officially on the cooldown after two years of consecutive growth in housing values, falling for the first time in the June quarter.

Data from Domain‘s June Quarterly House Price Report, released today, indicates that housing values have fallen by 0.9% since the previous quarter. The annual growth rate has declined to its slowest pace since March 2021, settling at 10.9%.

The report also revealed that unit prices outperformed house prices for the first time in three years during the June quarter. The revelation comes as a surprise as house prices rose by 34% from trough to peak during the pandemic, surpassing unit prices which rose by 10%.

“These quarterly statistics reveal that affordability constraints, reduced borrowing capacity and the relative underperformance and perceived value units offer will help steer buyer demand to affordable options, likely to be both units and entry-priced houses,” said Domain Chief of Research and Economics, Dr Nicola Powell.

“The changing market dynamics across our capitals are also being driven by a rebalancing of supply and demand, weighing on overall buyer sentiment.”

National housing values last fell in June 2020, reflecting the impacts of the economic shutdown and a widespread lack of confidence in the market.

The quarterly price change went on to peak a year after in June 2021 as housing values increased by 6.6% on the previous quarter.

Unit prices performed similarly to housing prices over the past two years, before deviating from the trend in March 2022 with a 0.7% decline, while housing values rose by 1.1%.

The latest quarterly report shows unit prices are recovering however, increasing by 0.1% despite a 0.9% fall in house prices.

Sydney and Melbourne markets weaken

Despite a decline in the national median house price, Sydney and Melbourne were the only two capital cities to see a quarterly fall in housing values.

In Sydney, housing values experienced the steepest quarterly decline since March 2019, falling by 2.7% as the housing market downturn spread across the outskirts of the capital. The city’s annual growth rate has also dipped to its lowest since December 2020 at 8.3%.

Prices in Sydney’s unit market also decreased by 0.6%, decelerating the annual growth rate to just 0.4%. According to the report by Domain, the downturn in Sydney’s housing market is reflective of affordability constraints, inflation and reduced borrowing capacity.

Stratifed median house prices

Capital City Jun-22 Mar-22 Jun-21 QoQ YoY
Sydney $1,552,015 $1,595,797 $1,432,880 -2.7% 8.3%
Melbourne $1,074,369 $1,084,383 $1,021,056 -0.9% 5.2%
Brisbane $840,594 $838,599 $673,880 0.2% 24.7%
Adelaide $793,220 $765,833 $622,846 3.6% 27.4%
Canberra $1,154,535 $1,133,918 $1,010,445 1.8% 14.3%
Perth $651,956 $643,233 $601,607 1.4% 8.4%
Hobart $766,010 $760,166 $633,267 0.8% 21.0%
Darwin $632,071 $630,046 $610,278 0.3% 3.6%
Combined Capitals $1,065,447 $1,074,676 $960,490 -0.9% 10.9%

Source: Domain

While also on the downturn, Melbourne’s market has not appeared to have gained further negative momentum. Housing values fell by 0.9% in the June quarter, only marginally larger than the 0.7% decline of the previous quarter.

Melbourne’s unit market has remained relatively consistent, with prices rising by 0.4% in the last quarter and recording an annual growth rate of 1.4%.

The city’s premium price-point is likely behind the downturn, in addition to declining listing numbers as homeowners stall on selling amid rising interest rates.

Stratified median unit prices 

Capital City Jun-22 Mar-22 Jun-21 QoQ YoY
Sydney $790,983 $796,015 $788,107 -0.6% 0.4%
Melbourne $579,532 $577,504 $571,290 0.4% 1.4%
Brisbane $448,383 $442,068 $408,513 1.4% 9.8%
Adelaide $398,921 $383,643 $345,086 4.0% 15.6%
Canberra $599,735 $574,724 $567,718 4.4% 5.6%
Perth $356,904 $361,000 $379,357 -1.1% -5.9%
Hobart $555,884 $553,358 $489,343 0.5% 13.6%
Darwin $390,265 $378,735 $318,574 3.0% 22.5%
Combined Capitals $618,542 $617,699 $606,136 0.1% 2.0%

Source: Domain

Across the rest of Australia, housing values have hit record highs in Brisbane, Adelaide, Perth and Hobart. Annual growth rates in Brisbane, Adelaide and Hobart all surpassed 20%, with Adelaide crowned the fastest-growing capital city market over the 2021-22 financial year.

Dr Powell said while rising interest rates and inflation levels may be a concern for some Australians, many are well positioned to weather the storm.

“Some Australian households, and prospective buyers, are much more sensitive to higher interest rates and strong inflation levels due to the high level of debt being carried, ultimately eroding savings.

“We are seeing some Australians being placed in a financially vulnerable position, particularly in areas with a higher purchase price, such as Sydney and Melbourne.”

Dr Nicola Powell, Domain Chief of Research and Economics

Dr Nicola Powell. Image- Domain

“However, there are a number of reasons that suggest households could be resilient to these cash rate hikes, as asset balance sheets are in a good position due to strong growth in dwelling prices, strong household savings and some mortgage holders being ahead on their repayments,” Dr Powell concluded.

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