Australian Housing Prices Continue to Drop in July
Interest rates are on the rise in Australia in an effort to pull back rising inflation, and its effects on housing prices have been nearly immediate. The RBA, at its May board meeting on Tuesday, lifted the cash rate by 25 basis points to 0.35% in an attempt to curb surging inflation, which is rising at the fastest pace in two decades.
It has been a strange start to 2022 with housing pricing continuing to rise in the first quarter, albeit cooling off a little from 2020/21 years growth, but growing nonetheless. This was squashed with the first interest rate rise of 2022 in May.
There is still immense pressure on supply chains, globally, as seen on the supermarket shelves with $11.00 iceberg lettuces and no toilet paper.
According to Core Logic, Australia's housing downturn accelerated in July, with national home values falling -1.3%. The country's five eastern capital cities each recorded month-on-month declines, while Perth, Adelaide and Darwin recorded positive, but slowing, growth.
Most major regional centres within a commutable distance to Sydney, Melbourne and Brisbane, such as Geelong, Ballarat, Illawarra, Newcastle & Lake Macquarie, the Southern Highlands & Shoalhaven, the Gold Coast and Sunshine Coast, recorded a decline in home values over the three months to July, marking the end of nearly two years of significant capital gains.
Rents continued to increase through July, up 0.9% nationally or 9.8% over the past 12 months. Brisbane rents have surged the most, rising 4.2% in just three months.
On a more positive note, CoreLogic Research Director, Tim Lawless, noted this interest rate hiking cycle may be "short and sharp", with financial markets and some economic forecasters now factoring in interest rate cuts through the second half of next year.
“When interest rates start to stabilise, or potentially reduce next year, this could be the cue for housing values to find a floor,” Mr Lawless said. “Similar to the trajectory of the upswing, this downswing phase could be a short but sharp one, depending on how high and fast interest rate settings go.”
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