Australian Property Values Decline for Seventh Month Amid Rising Interest Rates

Australian property values have experienced a continuous decline for the seventh month in a row, with capital city prices currently dropping at their fastest rate in forty years. According to figures from Cotality, increasing mortgage rates are deterring buyers and weighing heavily on the national housing market. Furthermore, the focus of this market downturn has moved away from the traditionally dominant Melbourne and Sydney regions, shifting instead toward mid-sized state capitals.

Data released by Cotality indicates that Brisbane and Perth spearheaded the decrease in home values during October. Across state and territory capitals combined, property values slipped by 1.4% over the course of the month. Tim Lawless, the research director at Cotality, noted that the downward trend has become widespread, with home values in capital cities declining by 8.1% since March. Lawless explained that mid-sized capitals, which experienced extreme growth over the preceding six years, are currently undergoing a market correction, with virtually all suburbs in Brisbane, Adelaide, and Perth seeing lower values over the last three months.

This property market correction is primarily driven by four interest rate hikes implemented this year, with a fifth anticipated following the upcoming decision from the Reserve Bank. Consequently, many economists predict double-digit decreases in Australian real estate prices as borrowing costs increase. For instance, Morgan Stanley projects peak-to-trough price reductions reaching up to 15%. Lawless pointed out that elevated interest rates represent the most substantial negative influence on the market, compounded by affordability issues and a decrease in investor participation due to recent government tax adjustments.

Despite the record pace of the current decline, Lawless emphasized that these numbers largely reflect how exceptionally strong the property market had been previously. Over the last ten years, home prices have nearly doubled or more in Brisbane, Hobart, Perth, and Adelaide, while rising over 50% in Canberra, and more than 30% in Darwin and Sydney. Melbourne prices have increased by just over 20%. Because of these historical gains, the vast majority of homeowners continue to hold substantial profits despite the ongoing market correction. Cotality analysis shows, for example, that a 20% price drop in Perth from its peak would merely return the local market to where it stood in mid-2025.

Meanwhile, Peter Esho, an economist and chief executive of 13x, expressed the view that the major housing markets in Melbourne and Sydney are nearing a bottom, whereas mid-sized capitals remain in earlier phases of their respective downturns. Esho described the downward movement as a standard part of the housing cycle fueled by interest rates, which create a negative wealth effect and damage market sentiment. He added that he does not expect these price reductions to become systemic, noting that systemic issues would typically require a surge in unemployment or severe borrowing difficulties similar to those experienced during the global financial crisis in the United States. Additionally, rental pressures have begun to ease moderately, reflected by rising national vacancy rates and slower rent growth, though overall rents remain up by more than 50% over a six-year period.

Sources: The Guardian World

Aggregated summary. Original: The Guardian World