House prices nationally recorded their first decline since September 2020 in May, led by monthly losses in Sydney and Melbourne, the country’s two largest real estate markets.

The CoreLogic home value index declined 0.1 per cent in May with Sydney dropping 1.0 per cent and Melbourne off 0.7 per cent.

Canberra, Australia’s second most expensive property market behind Sydney, also eased 0.1 per cent, its first monthly decline since July 2019.

CoreLogic research director Tim Lawless said there has been significant speculation around the impact of rising interest rates on the property market.

But he said last month’s increase to the cash rate by the Reserve Bank of Australia is only one factor causing growth in housing prices to slow.

“It is important to remember housing market conditions have been weakening over the past year,” he said.

He said since a peak in May 2021, consumer sentiment has soured and fixed mortgage rates have trended higher.

“Housing has been getting more unaffordable, households have become increasingly sensitive to higher interest rates as debt levels increased, savings have reduced and lending conditions have tightened,” he said.

“Now we are also seeing high inflation and a higher cost of debt flowing through to less housing demand.”

Since peaking in January, Sydney housing values are down 1.5 per cent, but remain 22.7 per cent above pre-COVID levels.

In comparison, Melbourne, which experienced a softer growth phase, has recorded a smaller 0.8 per cent decline, but housing values remain 9.8 per cent higher compared to the pre-COVID level.

While combined capitals index declined 0.3 per cent in May, CoreLogic’s combined regional index rose 0.5 per cent.

But Mr Lawless said most regional markets are likely to soften in line with higher interest rates and worsening affordability pressures.

“Arguably some regional markets will be somewhat insulated from a material downturn in housing values due to an ongoing imbalance between supply and demand as we continue to see advertised stock levels remain extraordinarily low across regional Australia,” he said.

CORELOGIC NATIONAL HOME VALUE INDEX FOR MAY
(month, annual)

  • National – down 0.1 per cent, up 14.1 per cent
  • Sydney – down 1.0 per cent, up 10.3 per cent
  • Melbourne – down 0.7 per cent, up 5.8 per cent
  • Brisbane – up 0.8 per cent, up 27.8 per cent
  • Adelaide – up 1.8 per cent, up 26.1 per cent
  • Perth – up 0.6 per cent, up 5.6 per cent
  • Hobart – up 0.3 per cent, up 17.3 per cent
  • Darwin – up 0.5 per cent, up 6.4 per cent
  • Canberra – down 0.1 per cent, up 18.7 per cent
  • Combined capitals – down 0.3 per cent, up 11.7 per cent
  • Combined regional – up 0.5 per cent, up 22.1 per cent.

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

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