House prices: Major turnaround for real estate in Sydney, Melbourne, Brisbane
There has been a major reversal in the housing market, with prices stagnating following the massive property boom during the pandemic.
House prices fell in a major reversal after Australian home values jumped 25% during the pandemic.
Sydney and Hobart were hit the hardest by fears of rising interest rates as property prices plummeted in April for both capitals, a new report has found.
In Sydney, prices fell 0.1%, marking the first drop since the start of the pandemic, while Hobart saw an even bigger fall of 0.44%, which is the first drop for the capital since in early 2018, the PropTrack Home Price Index Report showed.
Home prices stagnated nationwide in April, rising just 0.13% month-on-month and advancing at the slowest nationwide pace since May 2020.
Price momentum in Sydney has slowed significantly since mid-2021, with annual price growth now half as fast as just six months ago, as affordability continues to bite with the median house in Sydney estimated to more than $1.2 million, according to the report. .
PropTrack economist Paul Ryan said two factors are currently influencing house prices in Australia.
“First of all, we’ve just seen such extraordinary growth over the past couple of years, it just couldn’t go on and it finally caught up with rising borrowing costs,” he told news.com.au.
“There is also a stronger than expected rise in inflation, which means interest rate hikes. Six months ago we were still debating whether interest rates would rise in 2023 and 2024 and now the forecast is that interest rates will rise by one to two percentage points by the end of the year.
Consumer prices rose an incredible 5.1%, according to data released this week, a record not seen in 22 years.
Rising interest rates could also trigger a 15% drop in house prices, analysis from the Reserve Bank of Australia (RBA) showed, which Mr Ryan said was a “reasonable” assessment. “, although he noted that she didn’t tell the whole story.
“The RBA is reacting to strong economic conditions with the lowest unemployment rate in 50 years and everyone expecting wage growth which means we are likely to see a balance. While borrowing costs will rise with rising interest rates, people’s wages rise and rise to balance that out,” he said.
“The last time we saw this happen was between 2002 and 2008, when interest rates rose rapidly but wages also rose, so we saw house prices rise. But I’m not saying that’s going to happen here because it was a 30-year event.
“But it shows that looking only at the effect of interest rates on house prices is not straightforward enough. Strong economic conditions generally have a positive effect on housing prices.
House prices rose just 0.05% in Melbourne in April and 0.04% in the ACT.
The best performers in April were Darwin with a 0.53% rise in house prices and Perth, which rose 0.45%.
Prices in Brisbane rose by 0.22% and Adelaide recorded an increase of 0.34%.
Mr Ryan added that there was “big tension” in the property market for buyers, which was also influencing prices.
“There’s a lot of uncertainty among buyers about where borrowing costs will be and they don’t have the certainty of people who entered the market at this time last year,” he said. he explained.
“These people were fairly certain that interest rates wouldn’t go up for a few years and that they would have a few years to pay off the mortgage even if they stretched a bit.
“Now buyers wouldn’t want to overcharge because refunds are going to be significantly higher in just six months.”
Nationally, home prices rose 16.05% year-on-year to a median value of $691,000, the report also found.