Australia’s economic crisis leading to decrease in value of capital city homes
The prices of homes in Australia’s capital cities have been caught up in the nation’s widespread economic crisis, with their value continuing to fall.
CoreLogic’s Home Value Index, a tool which measures movements in capital city housing markets, recorded its first national fall since September, 2020 in May.
Across the last quarter, the value of homes in Melbourne and Sydney has fallen by 1.8 and 2.8 per cent respectively.
While increases have been recorded in Adelaide (5.2 per cent), Brisbane (2.7 per cent) and Perth (2.1 per cent), these rises were not enough to offset the decreases in Melbourne and Sydney.
This meant there was a 0.9 per cent decrease in home value across those five cities in the last quarter.
CoreLogic cited a combination of higher interest rates, rising inventory levels and lower sentiment for these “dampened conditions”.
“There’s been significant speculation around the impact of rising interest rates on the property market and last month’s increase to the cash rate is only one factor causing growth in housing prices to slow or reverse,” CoreLogic’s Research Director, Tim Lawless, said.
“It is important to remember housing market conditions have been weakening over the past year, at least at a macro level.”
Mr Lawless said after the quarterly rate of growth in national dwelling values peaked in May of last year, houses have become less affordable.
“Since then, housing has been getting more unaffordable, households have become increasingly sensitive to higher interest rates as debt levels increased, savings have reduced and lending conditions have tightened,” he said.
“Now we are also seeing high inflation and a higher cost of debt flowing through to less housing demand.”
Chief AMP economist Shane Oliver fears the value of capital city homes will continue to go down.
“Housing downturn is accelerating. Poor affordability, rising rates and poor confidence point to further sharp falls ahead,” he said.
“Top to bottom fall is now more likely to be 15 to 20 per cent.”
CoreLogic’s monthly housing chart for June also noted that those factors “may continue to put downward pressure on the home value index”.
Beyond Melbourne and Sydney, Canberra’s dwelling values also fell by 0.1 per cent in May, its first monthly decline since July, 2019.
The nation’s capital is Australia’s second most expensive property market behind Sydney.
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