House prices are falling at the fastest quarterly rate on record

Rising interest rates, surging inflation and high levels of household debt have seen home prices across the country fall at their fastest-ever quarterly rate.

According to Domain’s House Price Report, house prices across the combined capital cities are now 4.9 per cent below the March 2022 price peak, while units are 3.9 per cent below the December 2021 highs.

Despite pressure on prices, conditions are starting to ease and supply is normalising from its low, providing buyers with greater choice and opportunity to negotiate.

Domain Chief of Research and Economics Dr Nicola Powell said housing markets were in unchartered territory as interest rates rise and inflation bites.

“We’re going through housing market conditions that many buyers and sellers have never experienced in their lifetime,” Dr Powell said.

“The mix of interest rate hikes, strong inflation levels and high household debt has understandably had a significant impact on consumer sentiment. 

“While prices are expected to continue to fall further, our data, married with the current economic indicators, show it is likely that the September quarter could be a peak quarterly decline.”

According to Domain, house price falls are most pronounced in Sydney, Melbourne, Brisbane and Canberra.

In Sydney, house prices saw the fastest decline on record, with prices down 5.3 per cent over the quarter.

Despite the fast pace of the falls, house prices are still $326,000 higher than they were before the pandemic property boom and would need to fall by a further 22.3 per cent to erase the growth.

Unit prices have had their steepest fall in three years, of 3.1 per cent, and are 5.7 per cent below the December 2021 price peak, which equates to about $46,000.

Melbourne’s housing market downturn gathered significant momentum over the September quarter, with house prices falling at the fastest pace in the city’s history (down 4.3 per cent), marking the first annual decline since 2019. 

However, house prices are still $147,000 higher than they were before the pandemic property boom and would need to fall by a further 14.3 per cent to erase that growth. 

Unit prices have had their steepest quarterly fall on record (down 3.3 per cent), reversing the growth seen last quarter and putting unit prices on track to fall below pre-pandemic levels.

Brisbane’s housing market slowdown gathered momentum over the September quarter, with house prices falling 4.3 per cent, their fastest quarterly pace in the city’s history.

Adelaide is the only capital city market in Australia to record positive growth in house (0.6 per cent) and unit (2.5 per cent) prices over the September quarter and reach new records. 

However, the upswing did lose a little steam, with quarterly house price growth the slowest since prices declined in mid-2020. It was also the weakest outcome in a year for units. 

Canberra’s housing market slowdown gathered significant momentum over the September quarter, with house prices falling at their fastest rate on record, to be 6 per cent below the December 2021 price peak.

Hobart’s house prices declined for a second consecutive quarter for the first time since 2014. 

Meanwhile, Perth’s housing market is now unanimously on a downward slide as house and unit prices declined 1.5 per cent and 2.4 per cent respectively, over the September quarter.

Despite the pace of the falls this quarter, house prices remain 7.9 per cent higher than a year ago.

House and unit prices were on the decline again over the September quarter in Darwin, reversing all of the previous quarter’s growth. 

This is the steepest decline in prices since the onset of the pandemic for the city.

Dr Powell said that despite weakness across the country, there are still some positive signs for property markets.

“We’ve started to see the Reserve Bank of Australia ease the pace of interest rate hikes, which has helped to shift the tone of what we can expect for the rest of the year, along with rising auction clearance rates and consumer sentiment improving from its low,” she said.

“With rising overseas migration and short-term visa holders returning, we should start to see an improvement in investment activity which, in time, will provide more rental opportunities. 

“Until we see this play out, prospective buyers will continue to stick to a more conservative approach by forward planning for any further rate hikes and being mindful of their lower borrowing capacity.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.