Seller beware: Report shows house prices plunging at sharpest rate in 40 years

House prices alert! Much of Australia’s real estate market is losing value, according to a new report. From Brisbane to regional Tasmania, home values in many cities and towns are declining.

Residz Team 3 min read

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Record high levels of debt held by many Sydney householders can be blamed for sharply weakening house prices in that city, but now much of Australia’s real estate market is losing value, according to a new report.

From Brisbane to regional Tasmania, home values in many cities and towns are declining, reports CoreLogic’s latest national Home Value Index. Sydney leads the way, well and truly, with values falling at the sharpest rate in almost 40 years.

Market conditions likely to worsen

CoreLogic’s Research Director, Tim Lawless, says housing market conditions are likely to worsen as interest rates surge higher through the remainder of the year.

“The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5,” he said on the release of the report.

July figures show the extent of the falls

“Particularly accelerated'' are the falls in Sydney’s housing market, which fell -2.2% in July.  Melbourne and Hobart fell -1.5% in the same month, Canberra -1.1%, and Brisbane values are down -0.8%.

Only Perth, Adelaide, and Darwin saw a growth in housing values through July, but the pace has slowed since interest rates rose in May.

Have we been here before?

The plunge in housing values is being compared to the time of the global financial crisis 14 years ago.

“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s,” says Mr Lawless.

Regional centres also losing some of their gains

Some of the big surprises are the falls in value of the stubbornly successful regional centres on the outskirts of Sydney, Melbourne and Brisbane.

They include towns that became enormously popular during the pandemic as affordable lifestyle destinations, such as Geelong, Ballarat, Illawarra, Newcastle and Lake Macquarie, the Southern Highlands and Shoalhaven, the Gold Coast and Sunshine Coast.

The report shows the regional markets are outperforming their capital city counterparts, but the combined regional index shows the real estate markets in these city-adjacent regions are weakening by as much as -1.1%.  

Spring and interest rate rises on the way

For sellers, there will be challenges ahead to achieve a top house price. More listings are expected to flow onto the property market in spring, increasing the stock available to buyers, just as demand from  buyers tails off with each predicted interest rate rise.  

“There is a good chance the number of properties sold in the second half of this year and into 2023 will continue to trend lower as higher interest rates, a more cautious lending environment and a reduction in household confidence continues to weigh on housing demand,” says Tim Lawless.

“Vendors are likely to be more competitive across a smaller pool of active buyers,” he said.

Bright news that could bring relief


The exception at the moment is for sellers in Adelaide and Perth which still have healthy buyer activity.

And, Tim Lawless says home sellers would do well to remember the context of the statistics.

“While national home sales are falling from record highs, they are still 9.2% above the previous five-year average for this time of the year,” he says.

Rental market tight and will get tighter

The report also points to the rental market being extremely tight, with vacancy rates around 1% or lower across many parts of Australia and no signs of a lift in rental supply.

When more overseas visitors arrive, the already tight rental supply will be stressed further.

It’s the classic inflation-raising imbalance of supply and demand. There’s too little supply of rental properties and too much demand.

“Such widespread and rapid rental growth is likely to remain one of the key domestic factors pushing up inflation, along with construction, food, transport and energy costs,” Tim Lawless says.

And higher inflation means higher interest rates in the short-medium term.

“Even the best case interest rate scenario indicates that variable mortgage rates will roughly double from their current level,” he says.

Could Australia’s house prices find a floor in 2023?

However, he pointed to some forecasts of interest rate cuts through the second half of 2023, which could see housing values “find a floor”.

“Similar to the trajectory of the upswing, this downswing phase could be a short but sharp one, depending on how high and fast interest rate settings go,” he said.

A helpful note if you’re selling a home, buying one, or just love learning about real estate; make sure you download a free property report from Residz.

Photo by Eugene Chystiakov on Unsplash