Rising interest rates and more expensive living costs have snapped a 20-month streak of increasing housing prices in Sydney and Melbourne.
Prices nationwide fell 0.1% in May, dragged down by a 0.3% drop in the major cities, according to data from CoreLogic.
While annual growth slowed, it was still solid at 14.1% reflecting the huge gains enjoyed over 2021.
Housing prices in Sydney dropped a steep 1.0% in May, while Melbourne fell 0.7%. Sydney prices are down 1.5% from their January peak but still up 23% on pre-pandemic levels.
Most other cities fared better with Brisbane rising 0.8% in May, Adelaide 1.8% and Perth 0.6%.
The regions continued to benefit from a shift to country living and greater space, and prices rose 0.5% in May to be 22.1% higher than a year ago.
Prices Weaken in Big Cities
Weakness in the highly priced Sydney and Melbourne markets in part reflected the Reserve Bank of Australia’s move to raise interest rates in early May, the first rise in 11 years.
“Housing has been getting more unaffordable, households have become increasingly sensitive to higher interest rates as debt levels increased, savings have reduced and lending conditions have tightened,” CoreLogic’s research director Tim Lawless said.
“Now we are also seeing high inflation and a higher cost of debt flowing through to less housing demand.”
Supply was turning buyers’ way with listings rising to above average levels in Sydney and Melbourne, while clearance rates at auctions have steadily declined.
Demand had also come off the boil with home sales in Sydney down 33% in the three months to May from the same period a year earlier, while Melbourne was off 21%.
A sustained drop in housing prices would be a drag on consumer wealth given the notional value of Australia’s 10.8 million homes is put at A$9.9 trillion ($7.11 trillion).
- Reuters, with additional editing by George Russell
READ MORE:
Chairman, CEO Quit as Australia’s AGL Dumps Breakup Plan
Australian Casino Fined $57m For Illegal China Funds Transfer
Australian Central Bank Warns of More Interest Rate Rises
