Downswing driven by continued rate hikes, expert says
House and unit values dropped in more than 80% of suburbs nationwide in the December quarter, according to new data from CoreLogic.
That’s a marked rise from the previous quarter, when about 75% of suburbs were seeing values drop – and a huge reversal from the year prior, when only 10% of suburbs were falling, according to a report by The Australian Financial Review.
The downswing, driven by the rapid increase in interest rates, has turned the housing market from boom to bust, CoreLogic research director Tim Lawless told AFR.
“The market downswing doesn’t discriminate, with only a small proportion of suburban areas riding a wave of positive growth among the sea of declining values,” Lawless said. “This has resulted in a reduction in the number of million-dollar suburbs, particularly in our most expensive housing market, Sydney, where it had fallen from 439 in March to 345 in December.”
House price falls
Adelaide and Darwin saw the largest increase in the proportion of suburbs posting house price drops, rising to 71.6% and 84.2%, respectively, AFR reported. In the September quarter, houses in more than half of Adelaide’s suburbs were still rising in value, while two-thirds of Darwin suburbs were rising.
Perth, on the other hand, posted the steepest drop in the share of suburbs with falling house values at 49.8%, down from 53.1% in the September quarter, AFR reported.
Sydney, Melbourne and Hobart also saw a slight drop in the share of suburbs recording house price falls, from 100% in the September quarter to 98% each in the December quarter.
Eleven Sydney suburbs actually saw modest price increases in the December quarter, AFR reported.
“House prices in these areas have already declined 13.9% since peaking, so potentially, buyers are starting to find renewed value in these markets following the sharp drop in prices since the region peaked in early 2022,” Lawless said. “Eventually, more suburbs are likely to join the growth list, but over the short term we are expecting housing value falls to become more broadly based following further rate hikes through the first quarter of the year. Once interest rates stabilise, it’s likely housing values will find a floor soon after in many regions.”
Across Sydney, house values dropped 4.4% during the December quarter, lowering the median house price by $57,000 to $1.221,367, AFR reported.
Unit prices
Only six Melbourne suburbs posted house price growth in the December quarter, according to AFR. However, 51 suburbs saw a hike in unit prices.
Thirty-one of those suburbs were located within Melbourne’s inner south or inner-city regions, highlighting stronger growth conditions for inner-city units, Lawless told AFR.
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“Since the onset of COVID in March 2020,, inner Melbourne unit values are only 3.1% higher by the end of December 2022, while unit values across the inner south were roughly equivalent to March 2020 levels,” he said. “These are also some of the tightest rental markets in the country, with precincts of inner Melbourne recording the highest rates of rental growth.”
Lawless said that with the RBA expected to continue hiking rates, more price drops are likely in the offing.
“Considering there is likely to be more rate hikes in the cycle, we are expecting more areas will record a quarterly drop in home values,” he said. “However, if interest rates peak in the first quarter of this year, a peak in interest rates could be the cue for housing prices to stabilise.”
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