New data from Cotality reveals that house prices are currently falling in over 90% of Australian suburbs. This downturn is occurring amidst higher borrowing costs, a weak economy, and changes to the tax treatment of property investors.
Economists anticipate that average home values will continue to fall for the next six to nine months. Shane Oliver, AMP’s chief economist, suggests national property prices could be around 10% down from their recent peak, which he described as potentially the worst decline in the postwar period.
Despite the property market's decline, economists expect the Reserve Bank to implement a fourth interest rate hike. Michele Bullock, the Reserve Bank’s governor, stated on 11 August that the housing market downturn was "not the main game" for rate decisions, noting prices were still 50% higher than in 2020.
CBA analysts have predicted a 12-13% drop in Sydney and Melbourne property prices, alongside 8% falls in Brisbane, Perth and Adelaide. However, Oliver noted that even these losses would not significantly address Australia's housing affordability issues, potentially only returning prices to levels seen a year ago.
Jonathan Kearns, chief economist at Challenger, and Oliver both believe a further interest rate hike is likely at the early November meeting, as inflation remains the primary concern for the Reserve Bank.