Home prices fell in November as rates pressure buyers

Interest rate pressure is contributing to the “downward trend” in home prices, with new data showing values declined again last month.

The PropTrack Home Price Index found home values fell 0.16 per cent across the country in November, to a median value of $740,000.

Prices fell in nearly every capital city, with Darwin (down 0.49 per cent) and Melbourne (down 0.33) recording the largest falls.

South Australia continues to defy the downturn, with prices in Adelaide rising 0.25 per cent to a new peak of $648,000. Home prices in regional South Australia recorded the strongest pace of growth in November, rising 0.30 per cent to also reach a new price peak of $375,000.

Regionally, home prices in Queensland fell the fastest in November, slipping 0.49 per cent. Still, regional prices have held up better than capital cities, falling 0.16 per cent in November to sit 3.89 per cent above their level a year ago.

In the capital cities, prices are now 3.09 per cent lower than this time last year, but are still 30 per cent above their pre-pandemic levels.

PropTrack Senior Economist Eleanor Creagh said rising interest rates had quickly rebalanced the housing market from last year’s extreme growth. 

“National home prices have fallen for the eighth month in a row, with the fastest interest rate tightening cycle since the 1990s weighing on home prices in most parts of the country,” Ms Creagh said.

“Though the pace of price falls remains significantly less than the larger falls seen in June and July when interest rates first started rising, the downturn has continued to deepen as interest rates continue to rise.”

According to Ms Creagh, a further 25 basis point rate rise is all but certain on December 6, which would push the cash rate up to 3 per cent. 

“With additional rate rises on the horizon, borrowing costs will continue to increase and maximum borrowing capacities will further reduce,” she said.

“The significant reduction in borrowing capacities implies further price falls. 

“Though, positive demand effects will counter the downward pressure to a degree, with price falls likely to ease once interest rates stop rising in 2023.”

Source: PropTrack

Ms Creagh said Sydney home prices continue to lead the way lower and are now down 6.44 per cent over the past year to a median value of $992,000.

“Prices have fallen persistently since March this year, with Sydney seeing the greatest falls of any market,” she said.

“As interest rates have risen, home prices are falling fastest across more expensive regions and property types.

“Sydney, the priciest capital city nationally, is bearing the brunt of these effects. 

“However, the pace of price falls has eased in Sydney from the faster pace seen in June and July.”

In Melbourne, Ms Creagh said prices are now 4.49 per cent below their November 2021 level and 5.30 per cent below their recent peak. The median value of a Melbourne home is now $801,000.

“Price falls are expected to continue in Melbourne in the period ahead as interest rates continue to rise, further reducing borrowing capacities,” she said.

Prices recorded a slight fall (down 0.04 per cent) in Brisbane in November and are now 2.71 per cent below their peak recorded in April 2022 Ms Creagh said.

“Brisbane is the second strongest capital city market, with prices up 4.72 per cent over the past year,” she said.

“However, conditions in Brisbane have quickly shifted due to the fast pace of rate rises.”

According to Ms Creagh, Adelaide is the strongest performing capital city market over the past year recording annual growth of 12.63 per cent.

“Demand for more affordable regions and larger homes has buoyed the Adelaide market and is likely to continue to do so,” she said.

Perth home prices recorded a slight fall (down 0.04 per cent) in November, however, they continued to hold up better than other capital cities, up 4.13 per cent over the past year, Ms Creagh said.

Home prices in Hobart fell 0.27 per cent in November to sit 2.92 per cent below their peak in April. 

However, prices remain 1.06 per cent higher than levels seen in November last year and are up 43.8 per cent compared to pre-pandemic levels in March 2020.

Darwin led price declines across the capitals in November, with home prices falling 0.49 per cent to sit just 0.77 per cent above levels seen in November last year.

While, prices in Canberra were flat in November (down 0.02 per cent) and are sitting 4.20 per cent below their peak in March.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.

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