SYDNEY, Oct 1 (Reuters) – Australian home prices fell for a sixth month in September as a slump in transaction volumes deepened, data showed on Thursday, with another interest rate hike this week likely to tip the market into the worst downturn in three decades.
Figures from property data firm Cotality showed national home prices fell 1.1% in September from August, when they dropped by a downwardly revised 1.2%. That left values 5.2% below their peak and flat from a year ago.
Sydney prices fell 1.4% and are now nearly 9% below their February peak, surpassing the scale of the 2022-2023 downturn when the Reserve Bank of Australia raised interest rates by 425 basis points after COVID to tame inflation. Melbourne eased 0.7%, extending its losses from the peak to more than 7%.
Smaller capital cities are recording large falls too. Prices in Brisbane, Adelaide and Perth all slid more than 1%, surrendering some of the extraordinary 50% to 70% gains accumulated over the past five years.
The price drops are accompanied by much weaker transaction volumes, with sales for the past three months down 19% from a year earlier, suggesting the downturn has further to run as buyers remain on the sidelines.
As a result, inventories have lifted, said Tim Lawless, research director at Cotality. “Ironically, many prospective buyers don’t have the confidence or financial capacity to buy at the moment,” he said.
The RBA has flagged the housing market as a downside risk but that did not stop it from raising interest rates a fourth time on Tuesday to a 15-year high of 4.6% to fight stubborn inflation. It has warned it was ready to hike further if needed.
A sustained slump in housing turnover would have wide implications for the economy given the housing sector’s extensive links to industries ranging from real estate services to tradespeople and construction. Housing credit growth has started to slow.
With the government’s tax changes announced in May cooling investor demand, most economists are tipping a peak-to-trough fall of 10% for house prices in this cycle, the biggest downturn in three decades.
HSBC forecasts a 13% drop if rates rise one more time.
(Reporting by Stella Qiu; Editing by Stephen Coates)
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