The value of Australian homes declined by 0.14% in February – the smallest decline since the Reserve Bank began consecutive rises to the cash rate in May last year. According to property data company CoreLogic, prices actually had a small increase (0.3%) in Sydney. It’s unclear whether this is a sign that the period of falling prices is coming to an end or whether this is just a pause with further declines on the way.
House prices have been falling since last May. The drop (over 8% nationally) has been one of the steepest on record, although it’s relatively small in the context of two decades of growing prices. The drop has been linked to interest rates, which began to increase last May. By pushing up the cost of mortgages, this has pushed some owners to sell and prospective buyers to lower the amount they can afford to buy – resulting in lower prices overall.
Why the shift?
According to CoreLogic, February again saw prices fall in every capital city except Sydney. Prices in regional areas also fell. However, the falls were generally shallow. CoreLogic research director Tim Lawless said a key factor behind this result appeared to be that fewer people were listing their homes for sale. New listings in capital cities were 17% lower in February than they were a year ago.
However, Lawless suggests there is a “good chance” this result will be “short-lived” and that further steep falls may be seen in the coming months. “Arguably the full impact of the aggressive rate [rises] is yet to play out,” Lawless said, pointing out that many households who have fixed-interest-rate mortgages have not yet had to pay higher rates, but will in the coming months.