National house prices fall for first time since COVID

Australian house prices have fallen for the first time since the start of the COVID-19 pandemic, a new report from PropTrack has revealed.

Nationally, prices dropped 0.11% in May, marking the first drop since the start of the pandemic.

The PropTrack Home Price Index showed that Sydney prices fell by 0.29%, Melbourne prices declined by 0.27%, and the ACT recorded its first fall in three years, with prices dipping 0.12%.

However, there were small price increases in some capital cities including Adelaide (up 0.58%), Brisbane (0.35%) , Perth (0.19%) and Darwin (0.05%).

PropTrack is the property data analysis arm of REA Group, which also owns broker networks Mortgage Choice and Smartline.

Bianca Patterson (pictured above), director of Perth brokerage Calculated Lending, said she believed several factors had led to the slowing of property prices across Australia.

“The recent federal election, the increased cost of living and significant increases to fixed rates and their effect on servicing and affordability with lenders would have impacted property prices,” Patterson said. “Add to that the increase to the official cash rate for the first time in over 11 years and the press around its future movement over the next 12 months.”

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Patterson said interest rates rising played a part in property prices flatlining in May.

“I am having a lot of discussions with clients who are considering waiting out the imminent rate rises, believing these will price some buyers out of the market and force others to sell as their loans become unaffordable,” she said. “APRA’s introduction of the 3% servicing buffer in later 2021 should have eliminated rising interest rates forcing sales; however, we know there are borrowers out there who have overextended or who were not realistic about their actual living costs who will struggle as interest rates increase.”

Patterson said it was important to acknowledge there were multiple property markets across the country which were affected by different factors.

“Western Australia, for example, is heavily influenced by mining and resources, compared to Sydney, which is more influenced by overseas investment and migration,” she said. “I believe a natural correction to all markets is coming. However, I don’t necessarily see that every state will see the significant decline in values that is being predicted across the mainstream media.”

PropTrack economist and report author Paul Ryan (pictured below) said monthly price growth had slowed almost everywhere across the country, with regional areas seeing a flat result in May.

“Many regional parts of the country including Western Australia dropped by 0.43% and Queensland dropped 0.19%,” Ryan said. “Adelaide and Brisbane were the strongest-performing capitals over the month, with both markets bucking the trend and delivering continued growth in 2022.”

Ryan said home price growth had slowed considerably in 2022 and was now falling nationally.

“This was the first national price fall since the start of the pandemic and follows the first interest rate rise in early May,” he said. “A clear two-speed housing market has emerged as affordable lifestyle regions of Brisbane, Adelaide, regional NSW and Tasmania continue to see solid growth, with flat or falling prices elsewhere.”

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Ryan said that while May housing market activity was disrupted by the federal election, price growth had been slowing for some time.

“Annual price growth has fallen from 24% only six months ago to 14% now,” he said. “Conditions have now shifted rapidly from 2021. This follows expectations of sharply higher interest rates in 2022, which will erode the affordability of existing prices. The speed of official interest rate hikes and wages growth remain the key unknowns for price growth moving forward.”