AUSTRALIAN HOUSING MARKET’S BIGGEST DECLINE IN 40 YEARS

The Reserve Bank’s aggressive rate-hiking cycle has triggered the housing market’s biggest decline in more than four decades.

The 8.4% drop between May 2022 and January 2023 is the deepest peak-to-trough fall on CoreLogic’s records, which date back to 1980.

Sydney home values led this latest drop, falling 13% from their highest point. Brisbane prices plummeted 10% while Melbourne dwelling values tanked 8.6% from peak to trough.

The Reserve Bank’s combined 300 basis points in interest rate increases have shrunk the amount buyers can borrow and generally cooled their confidence.

High household indebtedness may have increased the housing market’s sensitivity to interest rates, CoreLogic head of research Eliza Owen said.

“Higher inflationary pressures, combined with a post-lockdown increase in spending, has also eroded household savings, which could be unlisted for a home loan deposit,” she added.

The market may also be enduring a “hangover” from higher sales and activity in 2021 that’s left a vacuum in demand.

The market is unlikely to have bottomed out, with further cash rate increases from 3.1% likely to continue driving prices lower in 2023.