Key facts
- National home prices fell 1.1% in September, marking the sixth consecutive monthly decline.
- Sydney prices are down nearly 9% from their February peak.
- Transaction volumes have fallen 19% year-on-year over the past three months.
- The Reserve Bank of Australia raised its interest rate to 4.6%, a 15-year high.
Australian home prices continued their downward trend in September, falling for the sixth straight month as transaction volumes slumped, according to data from property firm Cotality. National home prices decreased by 1.1% in September from August, following a revised 1.2% drop in the previous month. This brings values to 5.2% below their peak and unchanged from a year ago.
Sydney experienced a 1.4% decline in September, with prices now nearly 9% below their February peak, exceeding the scale of the 2022-2023 downturn. Melbourne saw a 0.7% easing, extending its peak-to-trough losses to over 7%. Smaller capital cities like Brisbane, Adelaide, and Perth also recorded falls exceeding 1%, diminishing some of the significant gains from the past five years.
The price drops are coupled with a substantial decrease in sales activity, with transaction volumes down 19% year-on-year over the last three months. This suggests the downturn is likely to persist as potential buyers remain hesitant. Tim Lawless, research director at Cotality, noted that inventories have increased, and many prospective buyers lack the confidence or financial capacity to purchase at present.
Despite flagging the housing market as a downside risk, the Reserve Bank of Australia raised its key interest rate for the fourth time this week to 4.6%, a 15-year high, in an effort to combat persistent inflation. The central bank has indicated a readiness to implement further hikes if necessary.
A sustained decline in housing turnover could have broad economic consequences, given the housing sector's extensive ties to industries such as real estate services, construction, and trades. Housing credit growth has already begun to slow. With government tax changes cooling investor demand, many economists anticipate a peak-to-trough fall of 10% in house prices for this cycle, potentially marking the most significant downturn in three decades. HSBC forecasts a 13% drop if rates increase further.