Pace of house price falls slows by six times: Domain

New data suggests Australia’s housing market downturn has lost steam and the peak rate of the quarterly decline has passed, according to a new report.

Domain’s House Price Report for the December 2022 quarter has revealed that combined capital house prices across Australia declined six times slower and unit prices three times slower than the September quarter.

House prices across the combined capitals fell 6.1 per cent from the March 2022 price peak, down about $66,000 to match late 2021 pricing.

Unit prices across the combined capitals are 4.3 per cent below the December 2021 price peak, down by about $27,000. They are only 5.1 per cent higher than before the pandemic upswing.

While property prices continued to fall, they remain much higher than during the pandemic trough. Indeed, this price cycle remains about $204,000 higher than the mid-2020 trough.

Sydney led the slowdown in the downturn momentum, with house prices falling three times slower than the previous quarter.

Despite the easing rate of decline, the NSW capital produced the steepest annual decline in prices in the city’s history of about $181,000 below the March 2022 peak.

Unit prices continued to fall over the December quarter by about $52,000 from the peak, following a period of significant underperformance of prices, which grew by only 8.9 per cent during the upswing compared to a 40.1 per cent spike in house prices.

Canberra’s house prices also saw the highest annual decline in the city’s history, now 6.7 per cent below the June peak. This is down by about $79,000 but is still 41.2 per cent higher than before the pandemic property boom.

Unit prices fell at the fastest annual rate since 1997, 6.2 per cent below the June 2022 peak, down by about $38,000.

Commenting on the national property price trends, Domain chief of research and economics Dr Nicola Powell observed that the spring season “bore the brunt” of interest rate rise shocks and “sky-high” inflation levels, which she said explained why house prices fell at their fastest quarterly rate in the September quarter.

“Sellers had been sitting on the sidelines to see how the housing market downturn unravelled and how high inflation and interest rates would land,” Dr Powell said.

“The low flow of new homes coming on the market throughout spring and early summer has kept overall supply limited despite a drop in the number of sales. This tight supply is helping to keep prices stable.”

Dr Powell continued: “Now in the December quarter, the data suggests that the peak rate of the quarterly decline has passed as buyers have had time to adjust to the new norm of rising debt cost and reduced borrowing capacity.”

Calculations from Domain Home Loans revealed that those with a $1 million mortgage are now paying almost $1,800 more on their loan than this time last year, which has been a “hard pill to swallow”, Dr Powell said.

“While lingering weakness has persisted in the property market, the potential end of interest rate [rises] later this year will bring in more buyers and sellers, creating some green shoots for the months ahead,” she said.

“That doesn’t discount from an [sic] unsettled RBA [Reserve Bank of Australia] environment and tight serviceability requirements which will take time for consumers to shake off.”

Dr Powell said the property price falls and the state and federal government support schemes to assist buyers facing affordability challenges (such as the NSW Government First Home Choice Scheme) will bring first home buyers to the centre stage this year.

“For this reason, we’ll likely find that unit prices will hold firmer for market entrants as affordability constraints, reduced borrowing capacity, an extremely tight rental market and migration returning will continue to support demand,” she concluded.

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