‘So much debt’: Property values sink in four out of five suburbs

Key points

• Rising interest rates have pushed property values lower in four out of five markets across Australia’s capital cities.
• House values alone are lower in every Sydney and Melbourne suburb analysed over the past three months. 
• When interest rates stabilise, housing values could find their floor, experts said.

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Property values are falling in four out of five suburbs across the capital cities, new figures show, as the housing downturn becomes deeper and more widespread.

Values fell in 2405 house and unit markets over the three months to September, CoreLogic figures show, or 79.5 per cent of markets analysed. It’s a jump from 1293 in the three months to June.

Property values have fallen as interest rates rise.Credit:Rhett Wyman

For houses only, house values fell in every analysed suburb in Sydney, Melbourne, Canberra and Hobart over the quarter, the research found. Unit values also fell in every Hobart suburb.

A sharp jump in interest rates since May has reduced the amount potential buyers can borrow and spend at auction, dragging property prices lower and spooking owners who were thinking of selling.

“With a lot of households holding so much debt, the impact of increasing interest rates is being felt quite broadly,” CoreLogic economist Kaytlin Ezzy said. “So we are seeing those broad-based declines in values.”

The pace of decline varies – in Sydney, for example, houses in Asquith near Hornsby lost 13 per cent in three months, while Silverdale in the outer western suburbs fell only 0.8 per cent.

Potential buyers can borrow less money to spend at auction. Credit:Melissa Heagney

House values in 72.6 per cent of Sydney suburbs are lower than they were a year ago, while for Melbourne houses in 74.3 per cent of suburbs are lower over the past year.

Brisbane’s property market was slower to tip into a downturn, and only two suburbs recorded a fall in house values compared to a year ago – Chermside (-1.8%) north of the river, and Fairfield (-0.3%) on the south side.

Perth values have not fallen as far as on the east coast and house values in 53.1 per cent of suburbs there are lower over the quarter, and 9.7 per cent have fallen compared to a year ago.

Ezzy said it was possible that values could fall further in suburbs that have already trended lower, and the downturn could spread to suburbs that have been resilient so far, depending on how fast and how high interest rates rise over the coming months.

The downturn began in more expensive neighbourhoods and has since spread, but as the cost of borrowing increases even relatively affordable units can slip further out of buyers’ reach.

But after the Reserve Bank cut the pace of its rate hikes from 50 basis points to 25 this month, and economists predict a peak in rates in coming months, there are signs the property downturn could moderate.

“As interest rates start to stabilise, we’ll probably see the housing market find its floor in values,” Ezzy said.

“We are starting to see the pace of declines ease in some of the more expensive markets that have been falling for longer,” she added, emphasising that the trend is still in its very early days.

Buyer’s advocate and chief executive of propertybuyer.com.au Rich Harvey said the spring property market has been “an incredibly mixed bag”, citing a Manly house that fetched $21.5 million at auction this weekend and attracted nine registered bidders.

On the other hand, buyers are cautious about rising interest rates as they watch their borrowing capacity decline, he said.

“They’re priced out of the market not because the prices have gone up, simply because they can’t borrow enough to get into the market,” he said.

But he agreed the price declines are slowing, albeit he expects prices to keep falling further.

Auction clearance rates have been hovering at about 60 per cent.Credit:Peter Rae

“We are starting to see a late surge in spring,” he said. “We’re starting to notice more buyers coming out of the woodwork.

“There’s a few more bidders at auction and that’s reflected in the auction clearance rate, which is in the low to mid-60s.”

On Saturday, Sydney’s preliminary auction clearance rate was 66 per cent, and Melbourne’s was 64 per cent, on Domain figures.

A serious market decline would leave clearance rates in the mid-50s, he said.

“We’re not there,” he said. “I think we’re through the worst of the downturn.”

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