The rate of house price declines has slowed, with values slipping by just 0.7 per cent across the combined capital cities in the December quarter as buyers adjust to higher interest rates. The rate at which prices fell in the final quarter last year is six times less than the 4 per cent drop recorded in the preceding three months, which was the largest ever quarterly fall, according to Domain data. House prices are no longer plummeting at a record pace in Sydney, Brisbane and Canberra, and have stabilised by posting small increases in Melbourne, Adelaide, and Hobart. This will ease the pressure on the Reserve Bank of Australia (RBA) to push interest rates higher to curb inflation.
A sharp recovery in migration last year and expected continued strength this year will also help ease labour shortages and the central bank’s fear of a wages breakout, according to National Australia Bank (NAB), reducing pressure to raise rates. The increase in Australia’s population – expected to be about 435,000 in 2022 – will also boost demand in pockets of the housing market, primarily in Sydney and Melbourne. Gareth Aird, head of Australian economics at the Commonwealth Bank, the nation’s largest lender, said stronger population growth would partially offset falling property prices.
According to some economists, the housing market is unlikely to bottom out until around September, when the central bank could begin cutting interest rates to buoy a struggling economy. Domain’s chief of research and economics, Nicola Powell, said the housing market downturn had lost significant momentum over the past three months.
Despite the slowing rate of quarterly falls, house prices in Sydney and Canberra have posted double-digit declines over the past 12 months, and this will continue to be a concern for the RBA.
Attribution:
This summary is based on a story published in the Australian Financial Review
https://www.afr.com/property/residential/property-price-slump-slows-from-record-speed-20230123-p5ceow
