Are Aussie home values on a steep decline? What’s next?
To the dismay of sellers and the benefit of active buyers, homes around the country have plunged an estimated average of $64,820 in value since May 2022 according to CoreLogic’s Daily Home Value Index.
Between May 2022 and January 2023, Australian home prices saw a decrease of -8.40 %, surpassing the previous record in peak-to-trough declines, when home values fell -8.38 % between October 2017 and June 2019.
CoreLogic bases its Home Value Index on three broad housing types: detached houses, units and a combined dwellings index that includes both houses and units.
Why are housing prices declining right now?
Economists and property experts believe the primary driving force behind the decline is the dramatic cycle of rate hikes, aimed to combat inflation in the later half of 2022.
The 300-basis point hike in the underlying cash rate , consecutively over only eight months has resulted in a significant reduction in borrowing capacity, in turn, lowering the amount buyers can offer and afford for homes on the market.
Household debt around the country is also huge factor in the price of Australian homes, households with significantly higher debt are hit much harder, accompanied by interest rate hikes are eroding any savings that could essentially be used for a home loan deposit.
Though experts remind us that the steep downturn of housing prices are coming of a very high base, with housing prices reaching record highs during the peak of the COVID-19 pandemic.
Dwelling values increased a remarkable 28.9% between September 2020 and May 2022, which was the most rapid rise in home values across the country on record.
Although the current decline in home values may seem extreme, at the end of last year, home values were still 16% higher than they were five years ago, and a whopping 59.8% higher than they were a decade ago.
Which cities have seen the most significant changes?
According to recent data from CoreLogic, Australia’s three largest capital cities, Sydney, Melbourne and Brisbane, are bearing the brunt of the decline.
The following figures reveal the change in percentage and estimated dollar value in homes from May 7, 2022 to January 7, 2023.
Percentage change: -8.4 per cent
Dollar value change: -$64,820
Percentage change: -13 per cent
Dollar value change: -$150,758
Percentage change: -8.6 per cent
Dollar value change: -$70,243
Percentage change: -10 per cent
Dollar value change: -$78,381
Percentage change: -1.6 per cent
Dollar value change: -$10,395
Percentage change: -0.7 per cent
Dollar value change: -$3,897
Home values are expected to continue to decrease
According to the experts, Aussies home owners and prospective buyers can expect home values to continue to decline this year, with the housing market conditions are expected to remain soft in the coming months ahead.
It’s no surprise to many, and economists predict the cash rate is likely to further increase in 2023 with ongoing increases in interest rates continuing to erode the borrowing capacity of many prospective buyers, likely drawing out the country’s housing downturn until interest rates find stability.
Looking to get into the property market while prices are on the decline? We’re experts at finding the right home loan for you. Get in touch and speak to one of our experienced mortgage specialists for personalised help, guidance and the sharpest rates for your home loan.
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