Australian house prices drop for the first time in two years

The housing market cool down has gathered momentum and is spreading geographically across the nation, with one exception.

Domain’s June 2022 Quarterly House Price Report reveals that house prices have dropped for the first time in two years across Australian capitals, as the market finally slows nationwide.

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The median house price is currently sitting at $1.065 million, with prices now 0.9 per cent below last quarter’s record high.

Similarly, annual growth is experiencing its biggest slow down since March 2021, at 10.9 per cent, according to the Domain report.

Over the last quarter, Domain data shows the slow down is now spreading across the capital cities for the first time, with the annual pace of both house and unit price growth easing across all combined capitals, apart from units in Adelaide.

Domain June 2022 Quarterly House Price Report
Houses have dropped 0.9 per cent nationwide in the last quarter. (Domain)

For people who want to buy units, it’s still a challenging market.

For the first time in three years, unit prices have outperformed house prices, with the short term data the last three months showing unit prices have fared better than houses.

The strong performance of units comes off the back of a boom for houses – during the pandemic prices soared 34 per cent from trough to peak, while unit prices rose just 10 per cent.

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With interest rate hikes and inflation hitting a multi-decade high – CPI has risen to 6.1 per cent over the twelve months to the June 2022 quarter – home owners are feeling the squeeze.

“We are seeing some Australians being placed in a financially vulnerable position, particularly in areas with a higher purchase price, such as Sydney and Melbourne,” says Dr Nicola Powell, Domain chief of research and economics.

“These quarterly statistics reveal that affordability constraints, reduced borrowing capacity and the relative underperformance and perceived value units offer will help steer buyer demand to affordable options, likely to be both units and entry-priced houses.”

Domain June 2022 Quarterly House Price Report
Units, however, have slightly increased in value. (Domain)

The market in each capital city

Australia’s capital city markets are operating at two speeds. Melbourne and Sydney are showing weakness, and house prices in Brisbane, Adelaide, Perth and Hobart are at new record highs.

Unit prices are outperforming houses in all cities over the June quarter, apart from Perth and Hobart.

Sydney

House prices declined for the first time in two years, creating the steepest quarterly drop since March 2019.

They are now 2.7 per cent below the March 2022 price peak, with annual growth at the slowest rate since December 2020.

In contrast, the pace of decline for unit prices has been relatively moderate despite falling for the second consecutive quarter, with prices declining 0.6 per cent to $790,983. This has stalling the annual growth rate to 0.4 per cent.

The impact of affordability constraints, inflation and reduced borrowing capacity became particularly evident over the June quarter in Sydney, with a significant acceleration in house price falls – dropping almost five times faster than unit prices.

According to Domain Home Loan data, cash rate hikes have added around $726 a month to a $1 million-dollar home loan, and has clearly affected buyer sentiment.

Melbourne

Melbourne similarly trended down for house prices, slipping by 0.9 per cent over the quarter to $1.07 million.

This signals the first back-to-back quarterly drop since the 2018-19 downturn.

Despite the overall slowdown, Melbourne is a market where units have outperformed houses, which went up 0.4 per cent to $579,532, and houses dropped over six months.

This is 1.4 per cent higher than the same time last year and the first time in two years that unit prices have outperformed house prices in Melbourne.

Brisbane

The brakes are on in Brisbane, despite the market continuing to perform overall.

House prices went up by 0.2 per cent to a record high of $840,594, which is the equivalent of a rise of 24.7 per cent a year.

However, although an increase, it isn’t as steep as previous data shows, indicating the unprecedented price growth in Brisbane – its strongest upswing in 18 years – is decelerating and lost its momentum.

Unit prices rose 1.4 per cent to reach another new record high, at $448,383, with the pace also slowing.

Adelaide

Domain June 2022 Quarterly House Price Report
Adelaide is the only capital city market to buck the nationwide trend, however also looks to be losing momentum. (Domain)

Adelaide is the fastest growing capital city in Australia across the 2021-22 financial year.

House prices have jumped up 27.4 per cent over the year (or 3.6 per cent over the quarter), to reach a new record high of $793,220.

Unit prices reached a new record high of $398,921, up 4 per cent over the quarter.

According to Domain, buyer demand in Adelaide remains strong, which has been fuelling the growth. However, the growth upswing is roughly half that of the previous quarter and same time last year, also suggesting momentum is waning.

Perth

Perth house prices rose 1.4 per cent over the last three months to a new record high of $651,956. However, unlike other capital cities, unit prices dropped 1.1 per cent – the steepest annual fall in three years at 5.9 per cent.

The median house price is now 83 per cent higher than the median unit price, making Perth the most affordable city to purchase a unit – a title recouped in 2022 for the first time in 20 years.

Canberra

Canberra is still a rising market – house prices went up 1.8 per cent over the quarter to $1.15 million, and units rose 4.4 per cent to a new record high of $599,735.

For the first time since 2012, Canberra is the second most expensive capital city to purchase a unit. It remains the second most expensive city to purchase a house.

Hobart

In Hobart, things have slowed. Prices only went up 0.8 per cent for houses and 0.5 per cent for units, which represents flat growth.

Annual growth has lost momentum, providing the slowest pace in 15 months for houses and 12 months for units, at 21 per cent and 13.6 per cent respectively, suggesting that Hobart’s housing market has moved through its peak growth rate in 2021.

Darwin

House and unit prices were on the rise again for Darwin, although it is unlikely to be a sign of momentum building.

House prices increased by 0.3 per cent over the quarter to $632,071, 3.6 per cent higher than the same time last year, and unit prices rose by 3 per cent over the quarter to $390,265, up 22.5 per cent annually.

For the full Domain Quarterly House Price Report, click here.

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