Sydney, Melbourne continue to lead price tumbles

Prices are likely to continue falling beyond this year

Sydney, Melbourne continue to lead price tumbles

Rising interest rates are continuing to impact the Sydney and Melbourne property markets, with the two cities leading the rest of the capitals in home price falls.

Sydney home prices fell 0.7% last month, and have dropped 3.4% since their peak in February. Melbourne prices fell 0.59% in July, according to data from PropTrack.

Prices are likely to continue falling beyond this year, with the threat of rising mortgage rates discouraging buyers, The Australian reported.

“We’ve persistently seen the biggest slowdown, and the largest falls, in the most expensive markets,” PropTrack senior economist Paul Ryan told the publication. “Borrowers in these markets tend to take out larger mortgages relative to their income, so the spectre of higher interest rates weighs more heavily. It is partly the interest rate increases that have already happened, the fastest increase since 1994, as well as the uncertainty of how high borrowing rates will be later in the year.”

PropTrack predicts that property prices will fall between 2% and 5% nationwide by the end of the year, and another 7% to 10% in 2023.

Despite that, some realtors told The Australian they were still seeing plenty of interest at auctions. Ray White, one of the nation’s largest real estate groups, posted a 65% clearance rate over the weekend – up from 54% the previous weekend.

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Even accounting for the recent falls, Sydney prices have risen 2.5% in the last 12 months and are 26.9% above their March 2020 levels, at a median of $975,000.

Adelaide and Perth were the only two capitals to post price rises in July. Both cities recorded price gains of 0.4%, taking the median value to $634,000 for Adelaide and $534,000 for Perth.

Brisbane prices fell 0.1% in July, but have still posted a 21.6% increase in the past 12 months, according to The Australian.

Regional Victoria, where prices fell 0.32% in July, was the worst-performing non-metropolitan area of the country. The combined regional areas fell 0.18% in July and are 0.5% below their peak in April 2022.

“We’re expecting prices to continue to fall throughout the rest of the year and into next year,” Ryan told The Australian. “The rate of falls are to continue at this pace, roughly 0.5% a month, until the RBA pauses and assesses the impact on the economy.”