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Falling House Prices - September 2022

The housing market is the latest in the line of fire from rising interest rates, as sentiments continue to be plagued by inflationary pressures. CoreLogic’s home value index slumped by 1.6% in August, the largest monthly decline in 39 years, with property downturns appearing city-agnostic, affecting every major capital except for Darwin.


Economists are predicting these record downturns may deal a coup de grace to more than a quarter-of-a-century of rising house prices. Notably, the housing market has displayed characteristic resilience for much of the last 25 years, at most falling by 10%. Home lending has concurrently slid, with home loan commitments dropping 8.5% in July, the second largest monthly decline in the past two decades since the onset of the pandemic. This all occurs against the backdrop of rising cost of living and the transmission of higher interest rates to broader markets. Indeed, the fine balancing act played by the RBA is starting to place a chokehold on key markets, as the combined force of high inflation and borrowing rates have dampened consumer sentiments considerably.

Nonetheless, for prospective homebuyers, this may be prime-time to finally purchase that family home. Still, households should temper their long-term consumption decisions with notable caution - it’s not all unmitigated good news. High serviceability buffers due to rising rates are clamping on borrowing capacity, and the market is still suffering the hangover of high prices. At the moment, it’s certainly a seller’s market, with buyers willing to pay top dollar for the cream of the crop in property. However, expect vendors to hold onto their property assets as the market declines further, and for supply shortages to slowly materialise.



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