Australian house prices drop for the first time in 22 months
AUSTRALIAN house prices declined for the first time in 22 months in December as buyers increasingly found themselves priced out of the market, while the supply of properties increased.
The Home Value Index for major cities slid 0.2 per cent for its first fall since February 2023, property consultancy CoreLogic said on Thursday (Jan 2). Melbourne and Sydney, the two biggest markets, led the declines with drops of 0.7 per cent and 0.6 per cent, respectively.
On the other side of the country, Western Australia’s state capital Perth led gains with a 0.7 per cent increase, followed by the southern city of Adelaide, up 0.6 per cent. Those two cities also recorded the largest annual gains of 19.1 per cent and 13.1 per cent respectively. Yet even here the pace of appreciation had slowed in recent months.
“Growth in housing values has been consistently weakening through the second half of the year, as affordability constraints weighed on buyer demand and advertised supply levels trended higher,” said Tim Lawless, research director at CoreLogic.
“With worsening affordability constraints and reduced borrowing capacity, we have seen buyer demand pushed towards lower-priced markets,” he said.
Higher interest rates, a shortage of homes and booming population growth have triggered a housing crisis in parts of Australia. The problem has been particularly acute in Sydney where buyers are being priced out of the market given an average home costs 13-times income.
Yet costs have now reached such a level that, combined with interest rates at a 13-year high of 4.35 per cent, buyers are simply unable to raise the funds required to purchase a home. As a result, rents have also soared, though that market also ended the year on a softer note, CoreLogic said, citing a rise in the size of households in major cities and a cooling in migration.
“The final months of 2024 have set the framework for a soft start to 2025,” CoreLogic said. “However, as with 2024, we could likely see another year of multi-speed conditions, with the potential for a modest rebound in value growth once interest rates start coming down.” BLOOMBERG
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