August saw prices fall at quickest rate in 40 years: CoreLogic

The downswing was led by the NSW capital, with prices in Sydney dropping 2.3 per cent in August, while Brisbane shifted into a downturn as values declined 1.8 per cent, in a move that CoreLogic research director Tim Lawless described as acute. 

“It was only two months ago that the Brisbane housing market peaked after recording a 42.7 per cent boom in values. Over the past two months, the market has reversed sharply with values down 1.8 per cent in August after a 0.8 per cent drop in July,” he said. 

Hobart and Canberra both saw sharp value falls at 1.7 per cent each, while Darwin’s prices did the opposite, rising by 0.9 per cent for the month. Despite the acceleration of the market downswing in the final month of winter, only Sydney (2.5 per cent) and Melbourne (2.1 per cent) have recorded annual value declines. 

Additionally, the fall in regional dwelling values has caught up with their capital city counterparts, down 1.5 per cent in August, as opposed to the 1.6 per cent decline reported in the capital cities. However, the regional market upswing was sharper than the capital’s, with prices surging 40 per cent between March 2020 and January 2022 compared to 25.5 per cent.

“The largest falls in regional home values are emanating from the commutable lifestyle hubs where housing values had surged prior to recent rate hikes,” Mr Lawless explained. “Over the past three months, values are down 8 per cent across the Richmond-Tweed, 4.8 per cent across the Southern Highlands-Shoalhaven and 4.5 per cent across Queensland’s Sunshine Coast.”

Despite the recent weakness, housing values throughout Australia’s regions and capitals, with the exception of Melbourne, sit at least 15 per cent above pre-COVID levels recorded in March 2020, with the national median house price sitting at $738,321, with that figure rising to $808,287 when looking at the combined capitals.

CoreLogic believes this means most home owners have a significant equity buffer in place before their home is likely to drop below what they pay. 

“A 15 per cent peak to trough decline would roughly take CoreLogic’s combined capitals index to March 2021 levels. Additionally, many homeowners would have had at least a 10 per cent deposit and paid down a portion of their principal, the risk of widespread negative equity remains low,” Mr Lawless said.

He also offered his predictions of how the downturn will play out and when it will conclude.

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve.

“From current levels, interest rates are likely to increase by at least another 75 basis points and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values,” he concluded.