As the Reserve Bank’s war on inflation sweeps across the nation’s property market, house values in certain areas are plummeting by nearly $1000 each day, with warnings that prices will continue to decline as long as interest rates are increased.
Data released by CoreLogic on house values Thursday indicates that through August, house values fell in every capital city except for Darwin, with Sydney experiencing the steepest decline at 2.6%. It was the fifth straight monthly decline for the Sydney market, bringing the median house value down by $114,000 to $1.3 million, or $927 per day, since the end of April.
The scenario is comparable in Melbourne, where house values decreased an additional 1.5% in August and 4.4% in the last three months. The median house value in Melbourne has dropped by more than $51,000, or $415 per day, to $949,000.
Brisbane, with Adelaide and Perth, has previously resisted the recent property market downturn and experienced one of the most significant value declines in August. In August, home values in Brisbane declined by 2.1%, but they are still up 18.1% over the past 12 months. While the Reserve Bank tightens monetary policy, it indicates the housing market will continue to struggle.
House values are unlikely to stabilise until interest rates reach a ceiling and consumer sentiment improves. At least 75 basis points are anticipated to be added to interest rates, and there is a considerable likelihood that advertised stock levels will climb over the spring selling season, giving purchasers more options and exerting additional downward pressure on house values.
Despite recent price declines, just a minor fraction of the COVID period increase has been reduced. In Sydney, home prices rose by 27.7% during the pandemic and have declined by 7.4% since their peak; in Melbourne, home values rose by 17.3% during the pandemic and have plummeted by 4.6% since their peak.
In May, the RBA raised interest rates for the first time in twelve years. Since then, it has lifted the official cash rate by 1.75 percentage points, and markets anticipate an additional 0.5 percentage point when the RBA board meets the following week.
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