We’ve just witnessed the Reserve Bank of Australia deliver an unprecedented fourth double interest rate increase in a row, and the uncertainty around how much higher rates have yet to go, is driving greater caution and uncertainty.
With consumer sentiment and confidence waning, we are seeing a direct impact on the property market with buyers “sitting on their hands” waiting for the market to bottom.
Every capital city apart from Darwin is now in a housing downturn, with Sydney leading the downswing with values falling -2.3% over the month, prices now below their level a year ago.
Brisbane had the most significant and rapid downswing in August with values falling -1.8%, after recording 42.7% boom in values to end of June.
Regional markets recorded their largest quarterly fall since 2011. Combined regional areas fell 0.34% in August.
Regional South Australia is the only market continuing to see significant growth.
Despite the shifting dynamics and recent price falls in the property market, it’s important to add a bit of context – although the market has cooled, housing values across most regions remain well above pre-COVID levels. Home values remain 15% or above the levels recorded in March 2020.
The wheels have turned dramatically
For those people looking to purchase, the urgency to buy has eased significantly. We have seen a total turn-around in the last 12 months from a “hot” market to a “cool” market, providing the best conditions for buyers, albeit the spike in interest rates.
Sydney and Melbourne, where the housing downturn is more advanced, are already seeing total advertised stock rise to above average levels. More choice and fewer buyers who are waiting to see if prices will fall further could further weigh down housing values.
With higher interest rates and, expectations they will keep increasing, the sentiment is that home prices will continue to fall throughout 2022 and into 2023, as reduced borrowing capacities are reflected in prices.
Once interest rates find a ceiling and consumer sentiment starts to improve we will start to see house prices stabilising and improved property market activity