Australian house prices are set to plunge beyond Sydney and Melbourne with a new major city suffering the first monthly decline since 2020 amid expectations of more interest rate rises.
Brisbane has been Australia’s best performing property market since the pandemic began, but that is now changing.
Queensland capital home prices, covering both houses and units, slipped by 0.09 per cent in June, marking the first monthly decline since April 2020, PropTrack data based on realestate.com.au sales figures and state government data showed.
Australia’s two biggest cities were already in decline, with Sydney falling another 0.4 per cent last month as Melbourne slipped by 0.61 per cent and Canberra slid by 0.23 per cent.
Now the nation’s three most populated centres – Sydney, Melbourne and Brisbane – are going backwards with the big banks expecting the Reserve Bank of Australia to hike the cash rate by another half a percentage point at its July 5 meeting.
PropTrack economist Paul Ryan said interest rate rise fears had sparked the sharpest national property market slowdown since 1989.
‘Conditions in the housing market have slowed rapidly, marking the sharpest slowdown in prices in more than 30 years,’ he said.
‘We expect continued price falls across the country until the uncertainty about the extent of interest rate increases is resolved – likely extending beyond 2022.’
On Friday Deutsche Bank predicted prices would suffer the biggest fall in 50 years with a 15 per cent drop by the middle of 2023.
Australian house prices are set to plunge beyond Sydney and Melbourne (Glen Iris auction pictured) with a new major city suffering the first monthly decline since 2020 amid expectations of more interest rate rises
House prices fall in most big cities in June
SYDNEY: Down 1.8 per cent to $1,382,631
MELBOURNE: Down 1.3 per cent to $975,850
BRISBANE: Flat at $892,133
ADELAIDE: Up 1.3 per cent to $699,251
PERTH: Up 0.4 per cent to $585,114
HOBART: Down 0.2 per cent to $796,863
DARWIN: Up 0.8 per cent to $588,928
CANBERRA: Up 0.3 per cent to $1,065,317
Source: CoreLogic data for median house prices in June 2022
Deutsche Bank Research economist Phil Odonaghoe said: “If our forecasts prove accurate, the middle of next year will see the weakest house price growth recorded in Australia for more than fifty years.’
A 0.5 percentage point RBA increase this month, following on from the increases in May and June, would see borrowers hit with the steepest rate rises in such a short time since late 1994.
This would also take the cash rate to a three-year high of 1.35 per cent from 0.85 per cent now.
When it came to house prices, separate data from CoreLogic showed declines or no growth in Sydney, Melbourne, Brisbane and Hobart in June.
Sydney had the biggest monthly fall of 1.8 per cent, taking the median house price back to $1,382,631.
Melbourne’s mid-point house prices dropped by 1.3 per cent to $975,850.
Brisbane was flat at $892,133 while Hobart slipped by 0.2 per cent to $796,863.
But Adelaide was still going strong with median house prices rising by 1.3 per cent to $699,251.
Perth’s equivalent value rose by 0.4 per cent to $585,114.
Regional house prices rose by just 0.1 per cent in June to $623,661 in a sign momentum is also slowing outside the capital cities.
On an annual basis, Brisbane and Adelaide have both had very strong median house price growth of 27.4 per cent during the last financial year.
Hobart had a strong increase of 13.6 per cent in the year to June 30 as Canberra’s values rose by 15.8 per cent.
Brisbane (Story Bridge near New Farm pictured) since the pandemic began has been Australia’s best performing property market but that has now changed. Queensland capital home prices slipped by 0.09 per cent in June, marking the first monthly decline since April 2020, PropTrack data based on realestate.com.au sales figures showed
They were well ahead of Sydney’s 6.8 per cent, Melbourne’s minuscule 3.5 per cent, Perth’s 6.2 per cent and Darwin’s 5.1 per cent.
Regional house prices have climbed by 20.1 per cent during the past year compared with 10 per cent in the capital cities.
CoreLogic research director Tim Lawless said the May rise caused the June downturn in property prices, and expected this to spread to other cities.
‘Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it’s likely the rate of decline in housing values will continue to gather steam and become more widespread,’ he said.
Westpac senior economist Matthew Hassan said a bigger 0.5 percentage point RBA rate rise in July would see sharper monthly house prices downturns beyond just Sydney and Melbourne.
‘The correction is likely to continue in coming months with the RBA expected to deliver more 50 basis point rate hikes in July and August,’ he said.
‘This is also likely to see the correction broadened beyond the Sydney and Melbourne markets.’
Inflation in the year to March surged by 5.1 per cent – the fastest pace since 2001 – and Reserve Bank of Australia governor Philip Lowe is expecting it to hit 7 per cent this year for the first time since 1990.
Inflation in the year to March surged by 5.1 per cent – the fastest pace since 2001 – and Reserve Bank of Australia governor Philip Lowe is expecting it to hit 7 per cent this year for the first time since 1990 (pictured is an ibis outside the RBA’s Sydney Martin Place headquarters)
Commonwealth Bank fixed rate surge
ONE YEAR: Up 1.4 percentage points to 4.99 per cent from 3.59 per cent
TWO YEAR: Up 1.4 percentage points to 5.79 per cent from 4.39 per cent
THREE YEAR: Up 1.4 percentage points to 6.39 per cent from 4.99 per cent
FOUR YEAR: Up 1.4 percentage points to 6.59 per cent from 5.19 per cent
FIVE YEAR: Up 1.4 percentage points to 6.69 per cent from 5.29 per cent
The Commonwealth Bank is expecting the RBA cash rate to reach 2.1 per cent by November while Westpac is forecasting a 2.35 per cent cash rate by February next year.
Another rate rise in July would see the cash rate rise for three months in a row for the first time in almost 12 years.
A half a percentage point rise next month would also mean home borrowers would have copped 1.25 percentage points worth of RBA interest rate rises over three consecutive months.
This would mark the steepest pace of increases in such a short time since late 1994, during the early years of the internet.
The May rise of 0.25 percentage points was the first increase since November 2010.
The June increase of 0.5 percentage points marked the first half a percentage point hike since February 2000.
CBA and NAB have this week hiked their fixed mortgage rates, by 1.4 percentage points and 1.1 percentage points, respectively, in anticipation of more RBA rate rises.
The Commonwealth Bank on Thursday raised its fixed mortgage rates by a massive 1.4 percentage points for both owner-occupiers and investors seeking one to five-year terms.
NAB’s one-year fixed rate is increasing by 1.1 percentage points to 4.69 per cent, from 3.59 per cent.
What a 0.5 percentage point rate rise in July means for borrowers
$500,000: Up $136 from $2,079 to $2,215
$600,000: Up $163 from $2,495 to $2,658
$700,000: Up $191 from $2,910 to $3,101
$800,000: Up $218 from $3,326 to $3,544
$900,000: Up $245 from $3,742 to $3,987
$1,000,000: Up $273 from $4,157 to $4,430
Monthly repayments based on popular Commonwealth Bank variable rate rising from 2.89 per cent to 3.39 per cent should the Reserve Bank cash rate in July rise from 0.85 per cent to 1.35 per cent