Some of Australia’s wealthiest areas are facing a sharp decline in property values, as rising interest rates lead to the fastest housing market decline in four decades.
For the third month in a row, the national median home price fell in July — this time by 1.3 percent, new CoreLogic data showed. Both house and unit values fell by two percent.
The rise in interest rates has already seen house and unit prices 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 ‘larger’ percentage increase 0.75.
Affluent postcodes in big cities are leading the way in decline while coastal areas and forest change are also gaining prominence.
The wealthiest suburbs are suffering a sharp decline in property values as rising interest rates are tipped to lead to the fastest housing market slump in four decades (pictured are volleyball players in Manly on Sydney’s north shore, where house prices have fallen by 7.8 percent in three months)
Average home prices fall as interest rates rise
SYDNEY: Down 2.5 percent in July and down 5.3 percent over the three months to $1,346,193
SYDNEY NORTHERN BEACHES: Down 2.5 percent in July and down 7.8 percent for three months to $2,499,569
MELBOURNE: Down 1.6 percent in July and down 3.7 percent for three months to $964,950
MELBOURNE INNER EAST: Down 1.8 percent in July and 4.7 percent for three months to $1,691,053
BRISBANE: Down 1.1 percent in July and down 0.3 percent for the three months to $884,336
GOLD COAST: Down 1.6 percent in July and down 1.2 percent over the three months to $1,078,080
SUNSHINE COAST: Down 1.5 percent in July and down 2.5 percent over the three months to $1,094,127
NSW SOUTHERN HIGHLANDS: Down 3.3 percent in July and down 3 percent for three months to $1,019,326
NSW CENTRAL COAST: Down 2.8 percent in July and down 5.7 percent for three months to $985,801
NEWCASTLE, LAKE MACQUARIE: Down 1.8 percent in July and down 2.5 percent over the three months to $892,329
CANBERRA: Down 1.4 percent in July and down 1.5 percent over the three months to $1,047,912
HOBART: Down 1.2 percent in July and down 1.3 percent over the three months to $782,748
CoreLogic research director Tim Lawless said Australia’s property market was facing its biggest slump in four decades, and interest rates were already rising at their fastest pace since 1994.
National property prices are now 2 percent below April’s peak, after rising 28.6 percent during the crisis when interest rates were still at a record low of 0.1 percent.
“Although the housing market is only three months into the decline, the national home value index shows that the rate of decline is comparable to the start of the global financial crisis in 2008, and the sharp decline of the 1980s,” he said.
Mr Lawless predicts a potential drop of 15 per cent in 2022 and 2023, but fears a 20 per cent drop in Sydney and Melbourne.
NEW SOUTH WALES
The wealthiest postcodes have fallen the fastest with house prices in Sydney’s northern beaches center falling 2.5 per cent in July and 7.8 per cent higher over three months to $2,499,569.
Apartment values in this prime beach area fell 3.3 percent in one month and 6.9 percent in three months to $1,173,049.
Sydney’s south, taking in the gentrified Redfern, saw its median 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 experienced a 1.9 per cent drop in house prices for the month to $3,384,474, with median house prices falling 6 per cent over the three months.
The city’s north shore saw its median home price drop 2.4 percent in the month and 5.9 percent in the quarter to $2,884,719.
By comparison, Sydney’s large median house price fell 2.5 per cent in July and 5.3 per cent in the quarter to $1,346,193.
Regional areas within a two-hour drive of Sydney take a hit in the Southern Highlands and Shoalhaven region, which covers Bowral and the South Coast, which has a 3.3 per cent month-on-month fall, bringing house prices back to $1,019,326.
Newcastle and Lake Macquarie house prices fell 1.8 per cent in July and 2.5 per cent over the three months to $892,239.
The Central Coast, an hour’s drive north of Sydney, saw its median house price fall 2.8 per cent in July and 5.7 per cent in the quarter to $985,801.
The Illawarra region, which includes Wollongong, saw its median house price fall 1.6 per cent in July and 3.5 per cent over the three months to $1,043,277.
The Blue Mountains fell 1.9 percent monthly and fell 3.2 percent quarterly, bringing the median home price back to $918,448.
In Melbourne’s top market, house values fell 1.8 per cent last month and 4.7 per cent over the three months to $1,691,053.
Mornington Peninsula house prices fell 2.2 per cent in July and 4.1 per cent over the three months to $1,009,910.
Coastal and tree-changing areas a short drive from Sydney, Melbourne and Brisbane are now also gaining popularity (pictured are surfers on the Gold Coast where house prices last month fell by 1.6 per cent)
Property prices in the historic capital are falling
2017-19: Down by 10.2 percent
1982-83: Down by 8.7 percent
Overall house prices in Melbourne fell 1.6 per cent in July and 3.7 per cent in the quarter to $964,950.
Brisbane, Australia’s best-performing property market during much of the pandemic, last month saw its median house price fall 1.1 per cent to $884,336.
Detached house values fell by 0.3 per cent in the quarter, as prices continued to rise in May and June as they fell in Sydney and Melbourne.
On the city’s east side, property values fell 1.4 percent last month and 0.9 percent in the quarter to $942,649.
On the Sunshine Coast, house prices fell 1.5 per cent in July and 2.5 per cent in the quarter to $1,094,127.
On the Gold Coast, house values fell 1.6 per cent last month and 1.2 per cent over the three months to $1,078,080.
On the other side of the Queensland border in northern New South Wales, the Richmond-Tweed region, which covers Ballina, saw its median house price fall 2.8 per cent in July and 4.5 per cent over the three months to $1,034,826.
In Melbourne’s upper inner-east market, house values fell by 1.8 per cent last month and by 4.7 per cent over the three months (pictured is an aerial view of Toorak)
All four of Australia’s big banks are forecasting a 0.5 percent interest rate hike in August, which would take the cash rate from a three-year high of 1.35 percent to a six-year high of 1.85 percent.
Inflation in the year to June rose 6.1 percent, the biggest increase since 2001 which put it above the Central Bank’s target of 2 to 3 percent.
Westpac and ANZ expect the cash rate to reach 3.35 percent.
This means that a borrower with an average mortgage of $600,000, buying a typical Australian home with a 20 per cent deposit, will be paying $1,060 more per month in their monthly payment compared to May.
Some parts of Australia are still fighting a national recession.
Adelaide’s median house price rose 0.3 per cent in July and 3.4 per cent in the quarter to $705,634.
Perth equivalent value rose 0.2 per cent to $587,024.
Areas within a two-hour drive of Sydney hit the Southern Highlands and Shoalhaven, covering Bowral (pictured) and the South Coast, which fell by 3.3 per cent monthly.
The story was similar in Darwin with house prices last month rising 0.2 per cent to $589,748.
But they were different from the previously booming markets now retreating.
Canberra’s median house price in July fell 1.4 per cent in July to $1,047,912 while the Hobart center value fell 1.2 per cent to $782,748.
CommSec chief economist Craig James said a further rise in interest rates would cause the housing market downturn to spread.
“More parts of the nation’s housing market are facing higher interest rates,” he said.
‘Further declines in house prices, as well as outright declines in monthly and annual prices, can be expected as interest rates rise further.’
Which borrowers can pay by November each month compared to May
$500,000: Up $883 from $1,922 to $2,805
$600,000: Up to $1,060 from $2,306 to $3,366
$700,000: Up to $1,236 from $2,691 to $3,927
$800,000: Up to $1,413 from $3,075 to $4,488
$900,000: Up to $1,590 from $3,459 to $5,049
$1,000,000: Up to $1,767 from $3,843 to $5,610
Calculations based on the cash rate rising from 0.1 percent in May to 3.35 percent by November, as forecast by ANZ. Monthly returns based on changes in the Commonwealth Bank rate have increased from 2.29 per cent to an expected 5.39 per cent.