Australia median dwelling value falls for sixth month, Cotality says

Australia’s national median dwelling value dropped to $899,236 at the end of September, driven down by a 1.1 per cent fall in the Home Value Index reported by Cotality. The data marks the sixth consecutive monthly decline, leaving properties worth 5.2 per cent less nationally than their peak in March. Cotality research director Tim Lawless said the downturn has now swept across 97 per cent of capital city suburbs over the three-month period ending September.

Brisbane And Sydney Record The Steepest Capital City Declines

Brisbane recorded the sharpest monthly fall among major capital cities in September with a 1.5 per cent drop, narrowly ahead of Sydney’s 1.4 per cent decline. Brisbane’s median home price fell to $1.05m, losing $59,000 since May after a 18 per cent surge over the preceding 12 months. Sydney home values now sit 8.6 per cent below their March peak, representing a $112,000 drop for the median property. Melbourne values fell another 0.7 per cent in September, according to Cotality. Adelaide fell 1.3 per cent, Perth dropped 1.2 per cent, and Canberra lost 1.1 per cent over the month. Darwin was the sole capital city to buck the trend, registering a 0.4 per cent increase in September.

ABC News and News.com.au reported that economists from AMP and Cotality now forecast a peak-to-trough national correction of up to 15 per cent. Cotality research director Tim Lawless told news.com.au that current quarterly growth trends annualized sit at a decline rate of 15 per cent nationally and 17.1 per cent across combined capitals. AMP chief economist Shane Oliver revised his outlook to a 10 to 15 per cent fall, noting that previous major downturns in 2022 and 2017-2019 topped out at roughly 8 per cent drops.

Interest Rate Hikes And Tax Reforms Pinch Buyer Borrowing Power

The Reserve Bank of Australia lifted the official cash rate by another 0.25 percentage points on Tuesday to 4.6 per cent, marking the fourth rate increase of the year. Comparison website Canstar estimated the four rate hikes have stripped about $47,400 from the borrowing capacity of someone earning the average full-time wage of $108,650 since the beginning of the year. Higher interest rates, federal budget tax reforms involving negative gearing and capital gains tax, poor affordability, and low consumer confidence are driving the market contraction.

Market liquidity has slowed significantly alongside the price drops. Cotality estimated that sales volumes over the three months to September were 19.1 per cent lower nationally than a year prior, led by Brisbane with a 27.2 per cent drop in transactions, Sydney down 26.5 per cent, and Perth down 24.2 per cent. Total advertised stock across the capitals climbed 23.1 per cent higher than the previous year despite a 9.2 per cent drop in new listings. Homes across capital cities now take a median of 39 days to sell, up from 23 days a year ago.

Falling Home Values Threaten More Builder Bankruptcies

Property developers warned that falling home values could intensify financial distress across the Australian construction sector. ABC News reported that Abedian warned that a 10 to 15 per cent reduction in home values would rapidly increase builder bankruptcies above the levels witnessed over the preceding 12 months. He argued that exorbitant construction costs, high union wage demands, and tax break changes affecting investors would damage the industry further.

Offsetting some of the broader market weakness, first-time buyer demand remained active at the lower end of the property ladder. The federal government’s 5 per cent deposit scheme supported over 102,000 first home buyers in the year since its expansion, averaging more than 8,400 new loans per month since June. Buyer’s agents noted that cheaper dwellings continued to attract steady interest from purchasers utilizing government support schemes despite general market hesitancy.

“If you have a 20 per cent fall, then you’re knocking about 2 per cent off consumer spending … that could tip us into a recession.”

More on this story: Housing Market Supports Gone as Borrowing Costs Rise · Australia headline inflation jumped to 4% in the year to August

ABC News