By Wayne Cole
SYDNEY – Australian home prices broke a 20-month winning streak in May as falls accelerated in Sydney and Melbourne amid rising interest rates and a cost-of-living crunch.
Figures from property consultant CoreLogic out on Wednesday showed prices nationally slipped 0.1% in May, dragged down by a 0.3% drop in the major capital cities. While annual growth slowed, it was still solid at 14.1% reflecting the huge gains enjoyed over 2021.
Values in Sydney dropped a steep 1.0% in May, while Melbourne fell 0.7%. Sydney prices are down 1.5% from their January peak but still up 23% on pre-pandemic levels.
Most other cities fared better with Brisbane rising 0.8% in May, Adelaide 1.8% and Perth 0.6%.
The regions continued to benefit from a shift to country living and greater space, and prices rose 0.5% in May to be 22.1% higher than a year ago.
Weakness in the highly priced Sydney and Melbourne markets in part reflected the Reserve Bank of Australia’s (RBA) move to raise interest rates in early May, the first hike in 11 years.
“Housing has been getting more unaffordable, households have become increasingly sensitive to higher interest rates as debt levels increased, savings have reduced and lending conditions have tightened,” said CoreLogic’s research director, Tim Lawless.
“Now we are also seeing high inflation and a higher cost of debt flowing through to less housing demand.”
Supply was turning buyers’ way with listings rising to above average levels in Sydney and Melbourne, while clearance rates at auctions have steadily declined.
Demand had also come off the boil with home sales in Sydney down 33% in the three months to May from the same period a year earlier, while Melbourne was off 21%.
A sustained drop in prices would be a drag on consumer wealth given the notional value of Australia’s 10.8 million homes is put at A$9.9 trillion ($7.11 trillion).
($1 = 1.3924 Australian dollars)
(Reporting by Wayne Cole; Editing by Sam Holmes)
