Australian house prices have fallen for the first time since the start of the COVID-19 pandemic, new data shows.
PropTrack’s latest Home Price Index, released today, also shows that the Canberra housing market has dipped, marking the first fall in three years.
Price growth has slowed rapidly right across the country and regional areas, which have experienced a boom in recent years, were largely flat in May.
PropTrack economist Paul Ryan said the national decline followed the first hike in interest rates by the Reserve Bank at the beginning of the month.
Slowing house price growth throughout much of 2022 was likely fuelled by growing expectations that the cash rate would rise – and rise sharply.
“However, it also follows the third-fastest period of property market growth in Australia’s history, with prices up 14% in the year to May and 35% since March 2020,” Mr Ryan said.
“Prices adjusted quickly to the reduction in borrowing costs as the pandemic shocked the economy and interest rates fell to their lowest level on record. Growth looks to remain subdued as uncertainty around borrowing costs is resolved.
“And to some extent, the 35% growth in home prices since mid-2020 could not continue indefinitely.”
National house prices have fallen for the first time since the COVID-19 pandemic. Picture: Getty
But some markets are bucking the slowing trend, with Brisbane and Adelaide continuing to see solid growth in May, Mr Ryan said.
Dwelling prices in the Queensland capital rose 0.35% last month, now up 25.92% over the past 12 months, the Home Price Index shows.
“Parts of Brisbane, particularly peripheral parts of the city, feature prominently in the highest growth regions over the past year across the nation,” Mr Ryan said.
Brisbane continues to buck the price slowdown trend. Picture: Getty
In the South Australian capital, home prices also rose 0.58% in May, up 24.24% annually.
“Brisbane and Adelaide are likely to continue to outperform – they have the appeal of city living with larger homes and lower prices,” he said.
Some smaller capitals also saw a modest uplift in home prices, with Perth rising 0.19% and Darwin up 0.05% in May.
Broadly, prices were flat in regional areas in May, representing the “sharpest slowdown and the slowest monthly result in regional Australia” in three years, he said.
“Nevertheless, regional areas continue to outperform capital cities and have benefited from relative affordability and preference shifts towards lifestyle locations and larger homes following the pandemic.”
Over the past 12 months, home prices soared by 21% in regional areas, compared to 12% across the capital cities, he pointed out.
Homebuyer interest in some regional pockets remains especially strong.
“The strength in regional areas has been particularly evident in New South Wales, Queensland, and Tasmania, where growth has been around 23% outside the capitals over the past year.”
Mr Ryan expects regional markets to continue outperforming capitals throughout 2022, as the lure of a quieter life with more room to move – coupled with more affordable homes – remains strong.
“A clear two-speed housing market continues, with affordable, lifestyle regions of Brisbane, Adelaide, regional NSW, Queensland, and Tasmania continuing to see solid growth, with flat or declining prices elsewhere.”
Adelaide’s market is also performing strongly. Picture: Getty.
The outlook for markets remains somewhat uncertain, with the speed of official interest rate hikes yet to be seen, and wages growth stubbornly flat.
At the same time, a boom in property investor activity and the imminent resumption of Australia’s migration program, is likely to benefit major cities.
“Preference shifts since the pandemic have also made both inner-city locations and apartments relatively cheap, which comprise the types of homes investors and recent immigrants often prefer,” Mr Ryan said.
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