National house prices have fallen in November but the pace of decline has slowed as low stock levels persist and buyers push ahead with purchasing despite rising interest rates.
Property data firm CoreLogic said home values across the country fell a further 1 per cent in November from a month earlier, with the median home price now at $714,475.
Brisbane and Hobart led the falls (-2 per cent), followed by Sydney (-1.3 per cent), Canberra (-1.2 per cent), Melbourne (-0.8 per cent) and Adelaide (-0.3 per cent).
Perth was flat, while Darwin values rose 0.2 per cent.
CoreLogic's head of research Eliza Owen said, while the rate of decline in values had been shrinking month to month, that did not necessarily point to a recovery in the housing market.
"I think it's the initial shock of rapid rate rises wearing off," Ms Owen said.
"We're still going to see a real test to the market in 2023, when a lot of people who secured long, low-mortgage rates on fixed terms are rolling off into an environment where average mortgage rates might be between 5-6 per cent."
Housing stock is also low as buyers hold off selling while prices are falling.
Unit values have held up better than houses, down 0.6 per cent compared to 1.2 per cent, respectively.
"That resilience could be coming from the fact that units didn't have as large an upswing, so there's not as much of a correction that's going to happen," Ms Owen said.
"But also they're relatively affordable."
Melbourne on track to lose COVID gains
"Despite this being one of the sharpest declines in housing values we've seen on record, it's worth noting, it's off the back of a large upswing," Ms Owen said.
CoreLogic's data also shows housing values across most of Australia have moved through a peak following a massive rise in dwelling values since the start of pandemic.
"So nationally, home values are still 17 per cent higher than when they were at the onset of COVID-19. Now, there's a lot of variation in that," she said.
"If you look at a city like Adelaide, values are 43 per cent higher than they were at the onset of COVID."
Sydney is the only city where values have fallen more than 10 per cent from their peak, but they are still much higher than pre-pandemic.
Melbourne did not see such large gains during the pandemic — prices there are only 2.8 per cent above where house prices were valued at the onset of COVID, and is on track to lose all of its COVID gains by March next year.
Testing the market
As the market falls, Melbourne couple Ted O'Neil and Vanessa Crouch are having a go at selling their renovated Yarraville home off-market
Selling off-market is a way for vendors to sell their property without spending on costly marketing campaigns.
Instead real estate agents target known buyers on their books.
"You pay for the photos and the floor plan and they get sent out to those registered buyers," Mr O'Neil said.
"If it doesn't sell you get feedback on your price rage and on anything you need to do to the house to make improvements to make it more attractive to buyers."
If they can find a buyer for the right price, Mr O'Neil and Ms Crouch plan to move to the coast.
Real estate agent Matthew John said about 30 per cent of his clients test the market by listing off-market.
Off-market sales represent about 15 per cent of his total sales.
"People aren't aware of where the values of their property sit because the market is changing so quickly," Mr John said.
"So it does give an opportunity for owners to be able to get some direct feedback from genuine and qualified buyers.
"The buying conditions are quite good at the moment, and I think that is going to flow through until the first half of next year."
PropTrack report
Rival survey, REA Group's PropTrack Home Price Index, showed national home prices fell 0.16 per cent in November.
That is an acceleration from the PropTrack Home Price Index's October report, which found home prices fell by just 0.06 per cent, the smallest fall since home prices peaked in March 2022.
"The downturn has continued to deepen as interest rates continue to rise," PropTrack senior economist and report author Eleanor Creagh said.
The cash rate is currently at 2.85 per cent with another increase likely next Tuesday.
"A further 25-basis-point rate rise, taking the cash rate above 3 per cent in December is all but certain," Ms Creagh said.
Will property prices recover in 2023?
The answer largely depends on the Reserve Bank.
Every interest rate hike reduces the amount people can borrow, and pay for a property. It also increases the repayments of existing borrowers.
"I think the recovery is expected across those markets that are more affordable amid higher interest rates," Ms Owen said.
"So for example, milder price declines are expected across Brisbane, Adelaide and Perth with the chance that they could actually recover towards the second half of 2023, if the cash rate starts to come back down.
"But again, that big test is going to come when we start to see the big surge in fixed rate borrowing rollover on to variable rates in 2023."
Property analyst Louis Christopher thinks the breaking point for newer home owners would be a cash rate above 4 per cent.
"We would definitely see a lot more property owners having to sell their home in the marketplace. And that would definitely force down prices," Mr Christopher said.
Instead he is betting on falls of up to 5 per cent in Darwin and gains of up to 9 per cent in Sydney, and strong gains in unit prices.
ANZ and some of the other big banks do not expect the property market to recover until 2024.
First home buyers struggle despite price falls
Camilla Rillstone does not want property prices to rise next year.
A two-bedroom unit where Ms Rillstone and her partner live in Sydney still costs about $1 million.
"We have been saving to buy property for about two years now and, unfortunately, I think the market is moving quicker than we can save," Ms Rillstone said.
Reduced borrowing power has only put their dream of buying near the beach where her partner grew up, further out of reach.
"We kind of had some initial thoughts a few months ago as to what we could borrow," Ms Rillstone said.
"But obviously, with interest rates going up, we have had to reassess that quite significantly, so whilst we thought we were close to being able to buy a property, we'll probably just have to wait a little bit longer."
Next year, it will back to the future for Ms Rillstone and her partner.
They are moving back in with his Dad to continue saving cash for their first home.
"Both myself and my partner work full-time and we definitely didn't think it would be as difficult as it is to get a foot on the property ladder, especially in our early thirties," she lamented.
'"But here we are, in the modern world."
