Australian property values ​​fall the most on record as interest rates rise: CoreLogic

Property values ​​in Sydney fell the most during the downturn, falling 13 percent from their peak, while values ​​in Brisbane fell 10 percent and Melbourne fell 8.6 percent. In cheaper Perth, values ​​have fallen by less than 1 percent.

The drop comes after house prices boomed during the lockdown years as households armed with cheap credit sought more spacious homes.

Real estate values ​​were hit by rising interest rates.

Real estate values ​​were hit by rising interest rates.Credit:Rhett Wyman

Property values ​​across the country rose 28.9 percent between September 2020 and May 2022, the fastest increase on record, according to the research.

Despite the recent declines, home values ​​across the country remain 16.3% higher than in March 2020. In Melbourne, which saw more muted gains as some residents moved away during the six lockdowns, values ​​are now 1.4% above their March levels 2020

Owen said the declines are not significant for recent home buyers unless they need to sell their property.

“If the worst comes to the worst and they have to sell their house to pay off the debt, that could potentially lead to some risk of negative equity, but given that most mortgages still came out with deposits of 20 percent or more , that would probably be enough. “That’s not the case for the majority of people who need to sell,” she said.

Real estate values ​​are inclined to fall further.

Real estate values ​​are inclined to fall further.Credit:Nicky Kurz

She expects real estate values ​​to fall further as interest rates rise a bit more this year as rate hikes are often delayed.

“This could be by far the biggest drop on record,” she said. “That’s a relatively big upswing.”

AMP Capital’s Chief Economist, Dr. Shane Oliver said he expects the record decline in values ​​to continue for several months after interest rates stop rising.

“From top to bottom, we’re looking at a 15 to 20 percent drop,” he said. “We’re about halfway at the moment.

“We still have more downside ahead because the impact of higher interest rates is still flowing through.”

Rising interest rates had the biggest impact on purchasing power, Oliver said, but a confluence of other factors also contributed to the speed of the decline.

“At the end of last year there was a massive boom, real estate had become very unaffordable, household debt had gotten very high and now we have a situation where interest rates have risen sharply,” he said.

“Combine that with high levels of debt and it’s a clear recipe for falling prices.”

He said some mortgage holders whose fixed-rate terms are ending may not be able to service their debt, leading to an increase in fire sales.

Anyone who has set their rate at around 2 percent can expect an increase to 5 to 6 percent, Oliver said.

The recent decline was more widespread than the 2017-2019 price declines, which were largely confined to major cities. This is because a pandemic-driven shift in buyer preference toward regional real estate and larger homes is reversing, he said. Australian property values ​​fall the most on record as interest rates rise: CoreLogic

Brian Lowry

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