Home values stall amid rate hike fears

With the inflation rate at 5.1 per cent fears are mounting ahead of the Reserve Bank of Australia handing down its cash rate today (Tuesday, 3 May), stalling the high home price growth seen during the pandemic.

According to PropTrack’s Home Price Index Australian home prices were flat in April, increasing by 0.13 per cent, to a median price value of $691,000.

The capitals that took the biggest hit in price growth were Sydney that fell 0.10 per cent (to a median value of $994,000) and Hobart that dropped 0.44 per cent, marking the slowest rate of growth since prices fell in the first months of the COVID-19 pandemic.

Perth and Darwin were the strongest performing capitals over the month (up 0.45 per cent and 0.53 per cent, respectively) but both have seen weak conditions throughout 2022 so far.

Adelaide and Brisbane saw an increase over the month, up 0.34 per cent and 0.22 per cent, while Melbourne remained slow with a rise of 0.5 per cent.

Over the past year, growth standouts among the capitals have been Brisbane, Adelaide and the ACT, while regional Queensland, NSW and Tasmania have led growth outside the capitals.

While price growth has slowed dramatically in 2022, regional areas continue to outperform the capitals in the post-pandemic market with a monthly increase of 0.44 per cent and an annual growth of 23 per cent, taking its median value to $552,000.

Prices have increased 23 per cent in the past year in regional areas, compared with only 14 per cent in the capitals.

The findings were closely shared with CoreLogic’s Home Value Index, which found Sydney and Hobart saw a downward trend in dwelling value growth.

But the report found Sydney and Melbourne posed the biggest setbacks on the rise in house values, with Sydney’s housing values recording its third consecutive month-on-month decline, down 0.2 per cent, while Melbourne values were flat at 0.04 per cent.

CoreLogic’s research director Tim Lawless said the slowdown in Sydney and Melbourne marked the first time since these cities were in the midst of extended lockdowns in mid-to-late 2020.

“Stretched housing affordability, higher fixed term mortgage rates, a rise in listing numbers across some cities and lower consumer sentiment have been weighing on housing conditions over the past year. As the cash rate rises, variable mortgage rates will also trend higher, reducing borrowing capacity and impacting borrower serviceability assessments,” Mr Lawless said.

However, despite an overall slowdown in price growth, more than half of the capitals still recorded a monthly growth rate of above 1 per cent, demonstrating “diversity in housing conditions”, the CoreLogic report said.

[Related: Surging inflation to eat the housing market: CoreLogic]