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Rising rates putting pressure on home prices

Brisbane property prices have fallen for the first time since April 2020, with rising interest rates dampening buyers’ enthusiasm for purchasing.

The latest PropTrack Home Price Index found Australian property prices fell again in June, down 0.25 per cent, including in Brisbane where prices dropped 0.09 per cent.

Prices also continued to decline in the two biggest capital cities, with a 0.40 per cent fall in Sydney while Melbourne fared a little worse with a 0.61 per cent decline.

PropTrack Economist and report author Paul Ryan said prices had dropped from their cyclical highs but were still up 34 per cent on March 2020.

“While prices are down only 0.55 per cent from their peak in March 2022, an outsized rate hike in early June and expectations of much higher rates later in the year continues to slow all markets, with widespread falls seen in June,” Mr Ryan said.

“The two-speed housing market remains evident. 

“The biggest slowdowns have been in the most expensive markets of Sydney, Melbourne and the ACT. 

“Affordable, lifestyle regions of Brisbane, Adelaide, regional QLD and Tasmania have continued to grow, but the slowdown is spreading to these markets, with Brisbane posting its first small fall since the pandemic began.”

Hobart (up 0.26 per cent) and Adelaide (up 0.42 per cent) were the strongest performing capitals over the month, both reaching new price peaks. 

South Australia and Tasmania continued to grow despite current market conditions.

 

Regional areas continued to outperform capital cities and are up 50 per cent since the start of the pandemic, although some regional markets declined in June.

Brisbane and Adelaide have recorded the most growth in property prices over the past year, while the regional sections of Queensland, South Australia and Tasmania have also fared well.

Mr Ryan said while prices grew rapidly as the Reserve Bank of Australia slashed rates, they were now slowing equally as fast.

“Conditions in the housing market have slowed rapidly, marking the sharpest slowdown in prices in more than 30 years,” he said.

“We expect continued price falls across the country until the uncertainty about the extent of interest rate increases is resolved – likely extending beyond 2022.”

Sydney 

Sydney home price growth fell again in June. Prices are now 1.5 per cent below the peak seen in February 2022, with annual price growth at the slowest rate since October 2020 according to Mr Ryan.

Expected interest rate increases may be weighing more heavily on growth in Sydney, the most expensive market, however the median house price is still more than $1.25 million.

Melbourne 

Home prices in Melbourne fell for the fourth consecutive month in June, with prices now down more than 1 per cent from the peak in February 2022, Mr Ryan said.

Price growth has slowed considerably since mid-2021. Prices are now up only 5 per cent over the past year, the least of any capital city market. Melbourne’s median house value is now just above $900,000.

Brisbane 

Brisbane prices fell slightly in June, ending the city’s exceptional run of growth since April 2020, which has seen prices increase by almost 50 per cent. 

Despite this monthly result, Brisbane is still the strongest market over the past year, up by 24 per cent, and looks set to continue to outperform other markets over the coming period.

Adelaide 

Adelaide continues to see solid growth, with prices up 0.42 per cent in June to reach a new price peak.

Prices increased 23 per cent over the past year in Adelaide, the second strongest capital city market after Brisbane. It continues to have the most momentum of any capital city market.

Perth 

The Perth market has grown slowly in 2022, posting slight growth in June. 

Annually, property prices have climbed nine per cent, with little of the slowdown seen in other markets. As a result, combined dwelling prices are at their peak, though unit prices have fallen across the city.

Hobart 

Although price growth is now slowing in Hobart, it remains one of the top performing markets across the country. 

Prices are up 17 per cent over the past year and are currently at peak levels. 

Darwin 

Darwin prices continued to increase slowly in June. Conditions appear to be stabilising in Darwin after rapid slowing in late 2021. 

Prices are up by less than 7 per cent in the city over the past year.

ACT 

Prices in the ACT fell again in June and growth has slowed rapidly in this market, with the annual pace of growth halving from above 30 per cent in late 2021 to 15 per cent now according to Mr Ryan.

With price levels in our nation’s capital higher than all capital cities apart from Sydney, stretched affordability may weigh on price growth over the coming period as interest rates increase.

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Rowan Crosby

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