Australian home prices fall for seventh month, looming rate hike adds to pain

SYDNEY: Australian home prices fell for a seventh month in October, with the downturn proving steeper than any in the past four decades, while the heightened risk of another imminent rate hike added to more pain for a once-booming housing market.

Figures on Monday from property data firm Cotality showed national home prices fell 1.2 per cent in October from September, when they dropped by a downward revised figure of 1.3 per cent. That left values 6.7 per cent below their peak and down 2.8 per cent from a year ago.

Capital-city home values were falling at their fastest in 40 years, the firm said, with prices down 8.1 per cent in just seven months.

That surpassed a decline of 7.0 per cent over the same timeframe in 2022-2023, when the central bank raised interest rates sharply to tame inflation after the Covid-19 pandemic.

Mid-sized capitals led the declines in October, with Brisbane home values falling 2.0 per cent and Perth down 1.7 per cent, unwinding some of the gains of roughly 50 per cent racked up over the past five years.

Sydney prices fell 1.6 per cent in the month, leaving values 1.5 per cent below where they were five years ago.

"Buyers have a lot more stock to choose from, they have more leverage and there isn't the same urgency to buy as there was a year ago when home values were rising rapidly," said the firm's research director, Tim Lawless.

"But despite this being a buyer's market, they are noticeably absent, reflecting low confidence and ongoing serviceability barriers."

Property sales have slumped, falling 23 per cent from a year earlier and standing 18 per cent below the five-year average. The drop has been most pronounced in Sydney, where transaction volumes are down 30 per cent from a year ago.

Adding to more weakness ahead, the Reserve Bank of Australia is widely expected to raise interest rates a fifth time next Tuesday to 4.85 per cent, a 18-year high, to fight inflation.

Markets imply nearly a 90 per cent probability of a hike, with a 20 per cent chance that interest rates could reach 5.1 per cent.

Policymakers have flagged the housing market as a downside risk to the economy but were sanguine about any financial stability risks from a property downturn.

Most Australian mortgage holders would still be in positive equity if house prices dived 20 per cent, the RBA said.