Australia’s property prices fell further throughout the nation in June as higher borrowing costs and rising interest rates weighed heavily on the market.
Nationwide, property prices dropped another 0.25% in June to a new median of $716,000, according to the latest PropTrack Home Price Indicator report.
Prices continued to decline in Sydney (-0.40%) and Melbourne (-0.61%), while prices in Brisbane dropped for the first time since the pandemic began in early 2020.
And monthly price growth has slowed almost everywhere across the country, with widespread falls in June.
Regional areas continue to outperform capital cities, although some regional markets declined throughout the past month.
While prices are down only 0.55% from their peak in March, an outsized interest rate increase by the Reserve Bank of Australia (RBA) in early June and expectations for much higher rates later in the year continue to slow all markets - with widespread falls seen in June, according to the report’s author, REA economist Paul Ryan.
But while the data may be alarming for some, Ryan also adds that this fall follows the third-fastest episode in Australia's history, with prices up 11.5% in the year to June, and 34% since March 2020 - the start of the pandemic.
“Prices adjusted quickly to the reduction in borrowing costs as the pandemic shocked the economy and interest rates fell to their lowest level on record,” he said.
The two-speed housing market worsens
We’re already seeing that property price growth is slowing in some areas and falling sharply in others.
We’re already aware that Australia is seeing a two-speed housing market.
There are houses, apartments, townhouses, and villa units located in the outer suburbs, middle ring suburbs, inner suburbs, and the CBD.
And they're all behaving differently.
And the PropTrack data shows that this is continuing, or even worsening.
The biggest slowdowns have been in the most expensive markets of Sydney, Melbourne, and the ACT.
Capital city markets in aggregate fell in the month (-0.35%), the report reveals.
This makes another flat result in regional areas look relatively strong.
Notwithstanding, this represents a sharp slowdown and the slowest monthly result since May 2019 in regional areas.
Regional areas have benefited from relative affordability and preference shifts towards lifestyle locations and larger homes following the pandemic.
Prices have increased 19% in the past year in regional areas, but only 9% in the capitals, the data revealed.
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And the strength in regional areas is particularly evident in Queensland, South Australia, and Tasmania, where growth has been above 20% outside the capitals over the past year.
The smaller capitals of Brisbane and Adelaide have also seen strong growth off the back of the same trends.
Brisbane and Adelaide have posted annual growth of close to 23% over the past year - bucking the trend amongst capitals in 2022.
In June, houses and units fell by similar amounts nationally.
However, the post-pandemic period has been typified by a desire for more space that has led to house prices (up 13% over the year) outperforming units (up only 6%).
Strongest price growth areas
Parts of Queensland - particularly peripheral regions of Brisbane and South East Queensland - dominate the list of Australia’s highest-growth regions in the year to June.
Queensland’s Ipswich and Logan-Beaudesert came out on top with both areas enjoying 30.21% and 29.58% price growth over the year respectively.
The north of Adelaide has now also snuck in to be the third strongest performing region across Australia over the past year with a 27.02% price growth, PropTrack’s report reveals.
Central West and the capital regions were the only 2 regions in New South Wales to make the list in 8th and 10th place respectively.
“Looking across the capitals, the outperformance of peripheral parts of cities is clear. With larger homes, and reduced commuting, these regions have increased in prominence over the post-pandemic period,” Ryan said.
What next for property price growth?
National prices have now fallen over two consecutive months, with widespread falls seen in June.
While prices are down only 0.55% from their peak in March 2022, an outsized rate hike in early June and expectations of much higher rates later in the year continue to slow all markets.
And the report shows that price growth has slowed rapidly and over a short period of time - annual price growth has halved in the past six months to 11.5%.
The RBA moved to increase official interest rates for the first time in more than a decade in early May, followed by a second consecutive increase in June and another expected in July.
And these cash rate increases have eroded buyer demand and weighed on price growth across the board.
Going forwards, Ryan expects continued price falls in Sydney and Melbourne while Brisbane, Adelaide, and regional parts of the country are expected to out-perform, spurred by relative affordability and preference shifts.
“However, if borrowing costs increase as much as some are expecting, even these markets will see sustained price falls in coming months,” he said.
“As has been clear over recent months, the speed of official interest rate hikes and wages growth remains the key unknowns for price growth moving forward.”
