Key takeaways
According to the PropTrack Index, nationally, home prices declined by 0.21% over December, placing values 2.29% lower compared to 12 months ago.
At a combined capital city level, prices fell by 0.22% in December, with every capital city bar Darwin and Hobart recording a drop.
The largest monthly declines were seen in Canberra (-0.43%) and Melbourne (-0.34%).
For Adelaide (-0.18%), this was the first monthly price drop seen post-pandemic.
Regional price declines were more subdued, down 0.17% nationally.
Regional Queensland (-0.33%) saw the largest drop, while regional Western Australia, Northern Territory, and South Australia defied the national trend to reach new peaks.
Comparing year-on-year, regional markets have outperformed their capital city counterparts in every state.
Despite recent falls, prices nationally remain 29% higher than their pre-pandemic levels.
Few sectors of the economy are as sensitive to interest rates as the housing market.
During 2022, eight successive rate rises aimed at offsetting high inflation sent tremors across the market causing buyers and sellers to sit on the sidelines paralysed by a lack of confidence.
However or markets did not crash like some of the commentators suggested they would.
In fact the latest PropTrack Home Price Index showed that national housing values fell 2.29 per cent over the 2022 calendar year.
Proptrack economist Anne Flaherty reports that at a national level, property prices have seen nine consecutive months of price declines, now sitting 4.25% below their peak.
But our housing markets have been fragmented and performance has been mixed with the largest falls recorded in the more expensive capital cities of Sydney, Melbourne, and Canberra, while more affordable markets have displayed greater resilience.
Eight consecutive rate hikes slashed the average buyer's borrowing capacity by around 25% due to the cumulative impact of these rate rises.
"While interest rates are likely to be approaching their peak, the Reserve Bank has signalled the potential for more increases in 2023.
Higher interest rates would further erode borrowing capacities and drive prices lower," she said.
Looking at each capital city in turn, PropTrack economist Anne Flaherty, gave the following breakdown
Sydney
Sydney home prices fell 0.19% in December and are now down 6.99% from 12 months ago.
Prices have fallen persistently since March this year, with Sydney seeing the greatest falls of any market.
As the most expensive capital city in Australia, the average loan size is highest in Sydney.
As a result, the relative impact of interest rate rises has been more substantial.
However, the magnitude of price declines has slowed in recent months compared to the price falls seen mid-year.
Brisbane
Brisbane home prices fell by 0.18% in December, however, remain 2.18% higher compared to 12 months ago and a whopping 43.1% above pre-pandemic levels.
This places Brisbane as the second strongest performing capital city (behind Hobart) post-COVID, with demand for real estate supported by high levels of interstate migration.
Perth
Perth home prices have proved relatively resilient over 2022, having fallen just 0.23% from their peak.
Over December, home prices declined by 0.05% in Perth, but remain 3.61% higher compared to 12 months ago, and 27.3% higher compared to pre-COVID.
Darwin
Darwin was one of just two capital cities that saw home prices rise in December, up 0.32%.
Despite the rise, prices remain 0.22% below their June peak, though are still up year-on-year.
Melbourne
Melbourne home prices declined by 0.34% in December.
This was among the smallest monthly declines recorded since prices started falling in April, however, reflected the second-largest drop seen in any capital city over December.
Prices are now 5.16% lower compared to 12 months ago, however, remain 14% higher compared to pre-pandemic levels.
Adelaide
Adelaide has maintained its position as the strongest-performing capital city over the past 12 months, with home prices up 9.63% annually.
Having largely bucked the trend of price declines seen in the other capital cities, Adelaide recorded its first price drop in December, falling 0.18%.
Supporting resilience in Adelaide has been its comparative affordability, which has reduced the relative impact of rising interest rates in comparison to more expensive markets.
Hobart
Hobart has been the strongest performing capital city post-COVID, with prices up a staggering 44.4%.
Despite seeing a price rise of 0.11% over December, the city has not been immune to the impacts of rising interest rates and prices have fallen 2.47% from their peak in April.
ACT
Home prices in Canberra saw the largest monthly drop of any capital city, down 0.43%.
Prices are now down 2.6% year-on-year and 5.05% below their March peak.
Source: PropTrack Home Price Index January 2023, Author: Anne Flaherty, PropTrack Economist
