National house prices fell for a sixth consecutive month, with higher interest rates making it costlier to borrow. In some parts of the country, home prices fell more than $100,000 over a three-month period, as rising interest rates reduced borrowing capacity and precipitated the fall. National home prices fell for the fourth straight month, according to Corelogic, as home demand began sliding as a result of rising borrowing costs.
The month-over-month drop in prices was also the largest since 1983, Corelogic said in its latest report on Corelogics Home Value Index. CoreLogic, the real estate data company, said that it is likely that housing prices will continue falling until interest rates hit the ceiling.
Eliza Owen, chief Australia researcher for CoreLogic, said it was too soon to tell whether the worst was behind home prices, which were rising as interest rates climbed, with inflation running at an annual rate of 7.3%.
In May, CoreLogics Home Value Index recorded its first fall since September 2020, as home prices fell in Sydney, Melbourne and Canberra, Australias second-most expensive real estate markets. The drop was blamed on a sharp month-on-month fall in home prices in Sydney (down 1.6%) and Melbourne (down 1.1%)–Australias two biggest property markets. In Sydney, home prices fell by more than 7 per cent from when prices started unwinding earlier this year, shortly before interest rates were raised.
Canberras home prices recovered from a near three-year slump in May May, ending the financial year slightly higher, despite rising interest rates and a dismal winter. Average UK house prices rose 8.2% over 12 months to August 2022, down slightly on an annual rate of increase recorded in September, according to property data from Zoopla, the real estate portal, writes Andrew Michael.
With mortgage rates having doubled since the beginning of the year, homebuyers calculations have changed significantly. Property portal Zoopla says if interest rates on mortgages hit 5% by the end of this year, the homebuyers potential buying power will fall by up to 28%, assuming that a homebuyer wants to keep their monthly home loan payments unchanged.
In its latest financial stability review, the Reserve Bank of Australia said that rising interest rates may force some property owners to sell their homes as they are unable to make their mortgage payments, with first-home buyers and those with fixed-rate mortgages being at risk. Many home owners are on fixed-rate mortgages, and so many would still see no rises to this part of their mortgage payments; some have been delaying payments in order to soak up early increases; and housing supply does not appear to yet be keeping up with demand. When you add up soaring mortgage rates, coupled with rising housing prices and wages not rising nearly as quickly, buying a house is now less affordable than it has been in decades, according to Black Knight.
The median-priced homes monthly mortgage payments are $930 higher than they were one year ago, an increase of 73%, according to Black Knight, a mortgage data firm. This years rate hikes are down significantly, with affordability constraints, skyrocketing inflation, and higher interest rates all conspiring to stifle the market. While total spending might be falling, thus cooling inflation, Australias property market is now in a new state of flux, with buyers either unwilling to purchase because of higher loan rates, or waiting for prices to drop even more.