CoreLogic tipping biggest property market downturn since the early 1980s

Some of Australia’s wealthier areas are suffering the sharpest drop in property values, as surging interest rates spark the steepest housing market downturn in four decades.

For the third straight month, the median national home price fell in July – this time by 1.3 per cent, new CoreLogic data showed. House and unit values together have fallen by two per cent. 

Interest rate hikes have already seen house and unit values fall by 2 per cent with more pain  expected for borrowers on Tuesday with the Reserve Bank forecast to raise interest rates by 0.5 percentage points or even a ‘super-sized’ hike of 0.75 percentage points. 

Wealthy postcodes in the big cities are leading the downturn with coastal and tree change regional areas also taking a hit. 

Wealthier suburbs are suffering the sharpest drop in property values with surging interest rates tipped to cause the steepest housing market downturn in four decades (pictured are volleyball players at Manly on Sydney’s northern beaches, where house prices have fallen by 7.8 per cent in three months)

Median house prices fall as interest rates surge

SYDNEY: Down 2.5 per cent in July and down 5.3 per cent over three months to $1,346,193

SYDNEY NORTHERN BEACHES: Down 2.5 per cent in July and down 7.8 per cent over three months to $2,499,569

MELBOURNE: Down 1.6 per cent in July and down 3.7 per cent over three months to $964,950

MELBOURNE INNER EAST: Down  1.8 per cent in July and 4.7 per cent over three months to $1,691,053

BRISBANE: Down 1.1 per cent in July and down 0.3 per cent over three months to $884,336

GOLD COAST: Down 1.6 per cent in July and down 1.2 per cent over three months to $1,078,080

SUNSHINE COAST: Down 1.5 per cent in July and down 2.5 per cent over three months to $1,094,127

NSW SOUTHERN HIGHLANDS: Down 3.3 per cent in July and down 3 per cent over three months to $1,019,326

NSW CENTRAL COAST: Down 2.8 per cent in July and down 5.7 per cent over three months to $985,801

NEWCASTLE, LAKE MACQUARIE: Down 1.8 per cent in July and down 2.5 per cent over three months to $892,329

CANBERRA: Down 1.4 per cent in July and down 1.5 per cent over three months to $1,047,912

HOBART: Down 1.2 per cent in July and down 1.3 per cent over three months to $782,748

CoreLogic’s research director Tim Lawless said Australia’s property market was facing the most severe plunge in four decades, with interest rates already surging at the fastest pace since 1994.

National property prices are now 2 per cent below April’s peak, after soaring by 28.6 per cent during the pandemic when interest rates were still at a record-low 0.1 per cent. 

‘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 in 2008, and the sharp downswing of the early 1980s,’ he said.

Mr Lawless is forecasting a 15 per cent drop in 2022 and 2023. 

NEW SOUTH WALES 

Richer postcodes have suffered the sharpest declines with mid-point house prices on Sydney’s northern beaches falling by 2.5 per cent in July and by very steep 7.8 per cent over three months to $2,499,569.

Apartment values in this upmarket coastal area plummeted by 3.3 per cent in one month and by 6.9 per cent over three months to $1,173,049.

Sydney’s inner south, taking in gentrified Redfern, saw its mid-point house price fall by 3.8 per cent in July and by 7.8 per cent in the quarter to $1,773,641. 

Sydney’s eastern suburbs suffered a 1.9 per cent monthly house price drop to $3,384,474, with mid-point house values plunging by 6 per cent over three months.

The city’s north shore saw its median house price drop by 2.4 per cent in a month and by 5.9 per cent over the quarter to $2,884,719.

By comparison, greater Sydney’s median house price fell by 2.5 per cent in July and by 5.3 per cent over the quarter to $1,346,193.

Regional areas a two-hour drive away from Sydney are taking a hit with the Southern Highland and Shoalhaven area, covering Bowral and the South Coast, suffering a 3.3 per cent monthly plunge, taking house prices back to $1,019,326. 

Newcastle and Lake Macquarie house prices fell 1.8 per cent in July and by 2.5 per cent over three months to $892,239.

The Central Coast, an hour’s drive north of Sydney, saw its median house price fall by 2.8 per cent in July and by 5.7 per cent during the quarter to $985,801.

The Illawarra region, covering Wollongong, saw its median house price fall by 1.6 per cent in July and by 3.5 per cent over three months to $1,043,277.

The Blue Mountains suffered a 1.9 per cent monthly drop and a 3.2 per cent quarterly plunge, taking the median house price back to $918,448.

VICTORIA 

In Melbourne’s upmarket inner-east, house values dropped by 1.8 per cent last month and by 4.7 per cent over three months to $1,691,053.

Mornington Peninsula house prices fell 2.2 per cent in July and by 4.1 per cent over three months to $1,009,910.

Coastal and tree change regional areas a short drive from Sydney, Melbourne and Brisbane are now also taking a hit (pictured are surfers on the Gold Coast where house prices last month fell by 1.6 per cent)

Coastal and tree change regional areas a short drive from Sydney, Melbourne and Brisbane are now also taking a hit (pictured are surfers on the Gold Coast where house prices last month fell by 1.6 per cent)

Overall house prices in Melbourne have plunged by 1.6 per cent in July and by 3.7 per cent over the quarter to $964,950.

QUEENSLAND 

Brisbane, Australia’s best performing property market during much of the pandemic, last month saw its median house price fall by 1.1 per cent to $884,336.

Values for a detached home fell by a lesser 0.3 per cent during the quarter, because prices had continued to rise in May and flatline in June as they fell in Sydney and Melbourne.

The city’s bayside east saw its property values drop by 1.4 per cent last month and by 0.9 per cent over the quarter to $942,649.

On the Sunshine Coast, house prices dropped by 1.5 per cent in July and by 2.5 per cent over the quarter to $1,094,127.

On the Gold Coast, house values fell by 1.6 per cent last month and by 1.2 per cent over three months to $1,078,080.

Across the other side of the Queensland border in northern New South Wales, the Richmond-Tweed area, covering Ballina, saw its median house price fall 2.8 per cent in July and by 4.5 per cent over three months to $1,034,826.

In Melbourne's upmarket inner-east, house values dropped by 1.8 per cent last month and by 4.7 per cent over three months (pictured is an aerial view of Toorak)

In Melbourne’s upmarket inner-east, house values dropped by 1.8 per cent last month and by 4.7 per cent over three months (pictured is an aerial view of Toorak)

All of Australia’s big four banks are predicting another 0.5 percentage point interest rate rise in August, that would take the cash rate from a three-year high of 1.35 per cent to a six-year high of 1.85 per cent. 

Inflation in the year to June soared by 6.1 per cent, the sharpest increase since 2001 which put it well above the Reserve Bank’s 2 to 3 per cent target.

Westpac and ANZ are expecting the cash rate to hit 3.35 per cent.

This means a borrower with an average $600,000 mortgage, buying a typical Australian home with a 20 per cent deposit, would be paying $1,060 more a month on their  monthly repayments compared with May.

Some areas of Australia are still defying the national downturn.

Adelaide’s median house price rose by 0.3 per cent in July and by 3.4 per cent over the quarter to $705,634.

Perth’s equivalent value went up by 0.2 per cent to $587,024.

Regional areas a two-hour drive away from Sydney are taking a hit with the Southern Highland and Shoalhaven area, covering Bowral (pictured) and the South Coast, suffering a 3.3 per cent monthly plunge

Regional areas a two-hour drive away from Sydney are taking a hit with the Southern Highland and Shoalhaven area, covering Bowral (pictured) and the South Coast, suffering a 3.3 per cent monthly plunge

The story was similar in Darwin with house prices last month rising by 0.2 per cent to $589,748. 

But they were the exception with previously soaring markets now going backwards.

Canberra’s median house price in July fell by 1.4 per cent in July to $1,047,912 as Hobart’s mid-point value dropped by 1.2 per cent to $782,748.

CommSec chief economist Craig James said more interest rate rises would see the housing market downturn spread.

‘More parts of the national housing market are responding to higher interest rates,’ he said.

‘Further slowing of home prices, as well as outright monthly and annual declines in prices, can be expected as interest rates rise further.’

What borrowers could be paying by November every month compared with May

$500,000: Up $883 from $1,922 to $2,805

$600,000: Up $1,060 from $2,306 to $3,366

$700,000: Up $1,236 from $2,691 to $3,927

$800,000: Up $1,413 from $3,075 to $4,488

$900,000: Up $1,590 from $3,459 to $5,049

$1,000,000: Up $1,767 from $3,843 to $5,610

Calculations based on the cash rate rising from a record-low of 0.1 per cent in May to 3.35 per cent by November, as predicted by ANZ. Monthly repayments based on a popular variable Commonwealth Bank rate increase from 2.29 per cent to a projected 5.39 per cent 

Read more at DailyMail.co.uk

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