House Prices Slump in Major Reversal for Real Estate in Australia
House prices have slumped in a major reversal after the value of Aussie homes surged 25 per cent during the pandemic. Sydney and Hobart have been worst hit by the fear of rising interest rates with house prices falling in April for both capital cities, a new report has revealed. In Sydney, prices were down 0.1 per cent marking the first fall since early in the pandemic, while Hobart saw an even bigger drop decreasing by 0.44 per cent, which is the first fall for the capital city time since early 2018, the PropTrack Home Price Index report showed. Property prices stalled nationally in April, rising just 0.13 per cent month-on-month and growing at the slowest pace nationally since May 2020. Price momentum in Sydney has slowed dramatically since mid-2021, with the annual price growth now half the pace seen only six months ago, as affordability continues to bite with the median house in Sydney estimated to now be worth over $1.2 million, the report said. PropTrack economist Paul Ryan said there were two factors currently influencing Australian house prices. “Firstly we just have seen such extraordinary growth over the past two years, it just couldn’t continue and it’s finally caught up with the increase in borrowing costs,” he told news.com.au. “There’s also a sharper inflation increase than expected which means interest rate hikes. Six months ago we were still debating if interest rates would go up in 2023 and 2024 and now expectations are that interest rates will increase by between one and two percentage points by the end of the year.” Consumer prices have risen by an incredible 5.1 per cent, data released this week showed, a record not seen in 22 years. Interest rate rises could also trigger a 15 per cent fall in housing prices, Reserve Bank of Australia (RBA) analysis showed, which Ryan said was a "reasonable” assessment although he noted it didn’t tell the full story. “The RBA is responding to strong economic conditions with the lowest unemployment rate in 50 years and everyone is expecting wage growth, which means we will likely see a balance. While borrowing costs will be going up with rising interest rates, people wages are actually going up and getting higher to balance that out,” he said. Ryan added there was “big tension” in the property market for buyers, which was also influencing prices.
Tags : House Prices Slump Major Reversal Real Estate Australia Reserve Bank of Australia (RBA) analysis PropTrack economist Paul Ryan