SYDNEY: The decline in Australian home prices accelerated again in December, ending the year with the largest drop in 14 years, a drag on household wealth that may curb consumer confidence and consumption as interest rates rise.
Figures from property consultant CoreLogic out on Tuesday (Jan 3) showed prices nationally fell 1.1% in December from November, when values dropped 1.0%.
Prices were down 5.3% last year, marking the largest calendar year decline since 2008, during the global financial crisis, when home values fell 6.4%. It was also the first time annual prices declined since 2018.
Sydney led the fall; prices there slid 1.4% in the month and were down 12.1% on the year, while Melbourne dropped 1.2% on the month, helping erase post-pandemic gains to only 1.5% above March 2020 levels.
Prices across the combined capital cities fell 1.2% in the month, while outlying regions lost another 1.0%.
CoreLogic research director Tim Lawless said 2022 has been a year of contrasts, with housing values mostly rising through the first four months of the year, but falling sharply as the Reserve Bank of Australia (RBA) started raising interest rates.
“Similar to 2022, the 2023 calendar year could be one of contrasts, characterised by further falls in home values through the early months, followed by a stabilisation in housing prices after interest rates find a peak,” Lawless said. “Initially, housing risks remain skewed to the downside.”
A rise in the number of newly listed properties, as pent-up supply flows into the market, could see time on market increase further and vendor discounting become more significant, contributing to further price declines, Lawless said.
The RBA has lifted rates by 300 basis points to a 10-year high of 3.1% to curb inflation, and investors are wagering rates might rise as high as 4% in the second half of this year.
However, the aggressive rate increases have not yet been fully felt in the economy, with consumption still robust, the labour market standing at the tightest in nearly five decades and inflation running at a 32-year high. – Reuters