While cost of living pressures continue to skyrocket, house prices have dropped for the first time in two years.
CoreLogic’s home value index slipped 0.1% in May – its first decline since September 2020 – driven by losses in Australia’s two largest markets, Sydney and Melbourne.
The finance and property analyst’s monthly metrics showed national dwelling values were up 14% over the past 12 months but the rate of price growth eased from a peak of 22.4% in the year to January, 7news.com.au reported.
Sales volumes were also starting to ease from recent highs.
CoreLogic said that in the 12 months to May, there were more than 586,000 sales nationally – that was 6.5% higher than the previous year – but monthly sales in May were nearly 27% lower compared to the same month in 2021.
Properties were also taking longer to sell.
In the three months to May, the median days on market for dwellings across the country rose to 28 from a recent low of 20 days. The proportion of sellers willing to discount, on the other hand, jumped from 2.9% to 3.3% since late last year.
It couldn’t be said to be a buyers’ market, though.
The recent half-a-percentage-point hike of the OCR to 0.85% – the biggest monthly rise in two decades – left buyers with less borrowing power and higher repayments. In the worst position were those who just stepped onto the property ladder, with some even facing the possibility that their loan could be worth more than their new home.
“Putting inflation pressure aside, the rise in the RBA cash rate will be translated into an increase in home mortgage interest rates,” Peng Yew Wong, RMIT property expert, told 7news.com.au. “Undoubtedly this will directly impact home borrowers as they will need to start paying a higher mortgage repayment.”
And if inflation and rising rates were a double whammy for buyers and sellers alike, they logically couldn’t be good for builders, 7news.com.au said.
Master Builders Australia CEO Denita Wawn said that with inflation rising more than expected, the rate hike was a wake-up call for the economy. And while she understood the rationale behind the OCR hike, she said economic growth should also be maintained to protect the construction sector as it deals with cost increases for products and labour.
“It is important the federal government makes use of both fiscal and monetary policy levers,” Wawn told 7news.com.au. “Microeconomic reform must also be a focus.”
By this, she meant lowering the cost of new homes by addressing issues such as land supply, regulation, and tax burdens.
Dwelling approvals declined for a second consecutive month in April, down 2.4%, according to CoreLogic, while lending for purchases also dropped 6.4% for the month, 7news.com.au reported.
