Australia's property market is facing an accelerating downturn, with national home values dropping by 0.9% in August, marking the fifth consecutive month of declines. This leaves the country's median property value 3.6% below its March peak. Sydney is leading the decline, with home values down 1.4% in August and 7.1% below peak levels recorded in February, equating to an almost $100,000 slump since February. Melbourne and Canberra also saw significant drops of 1.1%, while Brisbane fell 1% and Adelaide and Perth values dropped 0.8% in August. These declines are attributed to three interest rate hikes by the Reserve Bank of Australia (RBA) and the federal government's decision to restrict negative gearing and increase capital gains tax.
This downturn is becoming more widespread, with property prices falling in 93% of capital city suburbs. What began as a more concentrated easing in higher-value segments has now become a generalized softening across the market. The volume of home sales is tracking 15.5% lower than a year ago and 11.5% below the five-year average, indicating a sharp drop in demand. Brisbane, Perth, and Sydney have seen the largest declines in transaction activity, with sales volumes down more than 20% compared to a year ago. Buyer activity at open homes has also plummeted, from an average of four attendees last year to around two this year.
The current rate of decline in Sydney prices is outpacing the earlier 2022-2023 correction. Independent economist Alan Oster noted that while Sydney and Melbourne are seeing declines of around 7% to 8%, Perth is still experiencing an annualized growth rate of 20%. Analysts expect the downturn to continue, particularly if the RBA implements further interest rate hikes. While a full-blown crash is considered unlikely due to high migration and a shortage of housing supply, nationwide prices are expected to fall by a total of 7%, with declines in Sydney and Melbourne potentially reaching 11%. Despite falling home prices, rents continue to rise due to a low national vacancy rate of 1.6%, with median rent in Sydney increasing by 1.5% to $841 a week in the past three months.
