As mortgage rates rise, house prices have already fallen by 3% in Sydney and by 1.8% in Melbourne, writes The Guardian.
According to industry analysts CoreLogic, the fall in property prices in Sydney and Melbourne is gaining momentum as the cost of loans increases, creating a trend that is likely to be observed in the capitals of other Australian states.
The survey data obtained for most of June 2022 shows that the cost of housing in Sydney decreased by 3% compared to the peak in February, and in Melbourne by about 1.8% after the peak in March, said Tim Lawless, founder and director according to CoreLogic research. In June alone, prices in Sydney decreased by about 1.4% compared to May. We see that the rate of decline in the cost of housing is gaining a very clear dynamic.Lawless believes that the market is in the "fairly early stages" of a recession, with the degree of decline partly dependent on how quickly the Reserve Bank raises the interest rate to suppress inflation.
Last week, almost 29% of properties put up for auction in Sydney were taken off the market due to weak demand, which is the largest share since April 2020, when the first wave of Covid came, CoreLogic reports.
In addition, houses are being sold for longer. The average exposure period increased from 20 to 29 days.
Melbourne has also recently seen a decrease in the number of auctions, and the sale of real estate took longer.
The downward trends were less pronounced in other state capitals, partly because auctions are a less popular way to trade real estate there. According to Lawless, in Adelaide and Brisbane, only 10-15% of sales come from auctions. Adelaide remains the strongest real estate market among the capitals. The cost of housing here is still growing by about 1% per month.
According to Lawless, the prospect of lower property prices in most of Australia probably will not bring much relief to those who plan to rent an apartment. Rents are increasing by 9% annually across the country, while the vacancy rate is usually only about 1%.
Lawless hopes that the return of investors to the market will help to contain the fall in real estate prices.