New data shows Australian home values dropped 0.4% in June, the largest monthly fall in three and a half years.
The latest report from property firm Cotality shows Sydney recorded the biggest decline, with values down 1.2% in a single month, followed by Melbourne and the ACT.
Meanwhile, Perth and Brisbane are still growing, though at a much slower pace than before.
Here’s what you need to know.
Index
The Cotality Home Value Index estimates the value of all residential properties across Australia, not just those that have recently sold.
It uses recent sales data to determine how much features like location, size and number of bedrooms contribute to a property’s value, then applies that across the broader market.
It is one of the country’s most closely watched measures of housing market health.
House prices
Cotality’s June figures show national home values fell 0.4% over the month and are down 0.7% over the June quarter.
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Capital city home sales over the three months to June are estimated to be 16.2% lower than the same time last year.
Reason
Cotality research director Tim Lawless said three main pressures are hitting demand at once:
- The Reserve Bank has raised interest rates three times this year, making it more expensive to borrow.
- Rising costs for everyday essentials have left households with less confidence to make major financial decisions, like buying a home.
- Investors, a major source of demand across many markets, are expected to pull back once proposed federal budget changes to negative gearing and capital gains tax discounts take effect.
Housing Minister Clare O’Neil said the Government’s tax changes are working as intended.
She told the ABC the Government had forecast its tax reforms would slow house price growth by around 2% while increasing the number of first home buyers winning at auctions.
However, the Housing Industry Association (HIA) said housing affordability remains an issue for first home buyers, with more than 1.8 average incomes now needed to service a typical mortgage nationally.
HIA Chief Economist Tim Reardon argues the root cause is a shortage of homes, not too many investors at auctions.
