Beyond Sydney and Melbourne, Australian home values are expected to plummet as a new major city experiences its first monthly decrease since 2020 amid prospects of further interest rate increases.
Now the epidemic started, Brisbane had been Australia’s best performing real estate market, but that has since altered.
According to PropTrack data based on realestate.com.au sales numbers, Queensland capital property prices, which include both houses and apartments, fell by 0.09 percent in June, marking the first monthly decrease since April 2020.
Sydney lost 0.4% more last month, while Melbourne lost 0.6% and Canberra lost 0.23 percent. Australia’s two largest cities were already in decline.
The three most populous cities in the country, Sydney, Melbourne, and Brisbane, are already declining as a result of big banks’ expectations that the Reserve Bank of Australia will increase the cash rate by an additional half percentage point at its meeting on July 5.
Borrowers will see the biggest rate increases in such a short period of time since late 1994 if the RBA boosts interest rates by 0.5 percentage points this month, following increases in May and June.
Additionally, this would raise the cash rate from its current level of 0.85 percent to 1.35 percent, a three-year high.
Separate statistics from CoreLogic revealed reductions or no rise in house prices in Sydney, Melbourne, Brisbane, and Hobart in June.
The median house price in Sydney fell by the most each month, 1.8%, to $1,382,631.
The median price of a home in Melbourne fell by 1.3% to $975,850.
Hobart decreased by 0.2% to $796,863, while Brisbane remained unchanged at $892,133.
The median price of a home in Adelaide, however, increased by 1.3% to $699,251.
The corresponding price in Perth increased by 0.4% to $585,114.
In June, regional home prices increased by just 0.1% to $623,661, indicating that momentum is waning outside of the main cities.
Brisbane and Adelaide both had very significant annual increases in median home prices of 27.4% over the previous fiscal year.
Hobart experienced a significant gain of 13.6% in the year ending on June 30 while Canberra’s values increased by 15.8%.
They outperformed Sydney’s 6.8%, Melbourne’s tiny 3.5%, Perth’s 6.2%, and Darwin’s 5.1% by a wide margin.
During the past year, regional housing prices have increased by 20,1%, compared to a 10% increase in capital city prices.
Tim Lawless, director of research at CoreLogic, claimed that the June decline in real estate prices was a result of the May spike and predicted that this trend will continue in other locations.
It’s likely that the rate of drop in property values will continue to pick up steam and become more widespread because of the likelihood that inflation will remain persistently high for a while and the expectation that interest rates would increase significantly in response.
A larger July RBA rate increase of 0.5 percentage points, according to Westpac Senior Economist Matthew Hassan, would result in more pronounced monthly declines in home values outside of Sydney and Melbourne.
The RBA is anticipated to deliver additional rate hikes of 50 basis points in July and August, thus the correction is likely to continue in the ensuing months, he added.
Additionally, it’s possible that the downturn will extend beyond the markets in Sydney and Melbourne as a result.
The Reserve Bank of Australia governor Philip Lowe predicts that inflation will reach 7 percent this year for the first time since 1990, after rising by 5.1% in the year to March, the fastest rate since 2001.
The RBA cash rate is anticipated by the Commonwealth Bank to hit 2.1 percent by November and by Westpac to reach 2.35 percent by February of the following year.
For the first time in nearly 12 years, the cash rate would increase for a third consecutive month in July if there was another rate increase.
If interest rates rise by 0.5 percentage points next month, home borrowers will have already experienced 1.25 percentage point increases from the RBA in the past three months.
The rate of growth in such a brief period hasn’t been this rapid since late 1994, in the early days of the internet.
The 0.25 percentage point hike in May marked the first increase since November 2010.
The 0.5 percentage point increase in June was the first increase of that size since February 2000.
In anticipation of further RBA rate increases, CBA and NAB this week increased their fixed mortgage rates by 1.4 percentage points and 1.1 percentage points, respectively.
On Thursday, the Commonwealth Bank significantly increased its fixed mortgage rates for investors and owner-occupiers seeking maturities of one to five years by 1.4 percentage points.
The NAB one-year fixed rate will rise from 3.59 percent to 4.69 percent by 1.1 percentage points.