Sydney recorded its worst real estate decline in over 40 years as Australian home prices dropped for a third month in July. Rising borrowing costs and a cost of living crisis have reportedly contributed to the sharp decline.
Property consultant CoreLogic, in a report, showed that property prices fell at a national level of 1.3 percent in July compared to June, when prices dropped 0.6 percent. However, strong demand and gains made in 2021 and early 2022 ensured that property prices were generally higher by 8 percent for the year.
Prices in capital cities dropped by 1.4 percent in July, illustrating a greater weakness. Annual growth rates, which were hovering above 20 percent early in the year, dropped to just 5.4 percent.
Sydney prices drop further in July
Falling prices in Sydney gained momentum in July, as values fell by 2.2 percent. Melbourne reported a drop of 1.5 percent. Annual growth in Sydney slowed to just 1.6 percent, compared to 2021, when prices had increased by 25 percent.
Research Director of CoreLogicc, Tim Lawless, said that the rate of market decline was reminiscent of the global financial criis of 2008, and the massive downswing recorded in the 1980’s. He also said that the downturn was particularly sharp in Sydney, where values have fallen the most in the compared to the last forty years.
Other major cities in Australia have also witnessed a decline in the property market, with Brisban recording a drop of 0.8 percent, Canberra 1.1 percent and Hobart reflecting a decline of 1.5 percent.
Prices in other regions also witnessed a decline of 0.8 percent, as more and more people opted for living in the countryside.
Higher borrowing costs prompted by the Reserve Bank of Australia raising interest rates three months in a row are said to have contributed to the shift. The RBA is expected to raise rates again in coming days in an attempt to curb soaring inflation in the country.
Markets are speculating that the current cash rate of 1.35 percent could touch 3.40 percent by the middle of next year. Major banks in Australia have raised borrowiing costs on fixed-rate mortgages and have also tightened lending norms.
The sustained drop in house prices could prove to be a burden on consumer wealth, even as the notional value of the 10.8 million homes in Australia had risen by AUD210 billion in the first quarter of 2022 alone, touching almost AUD1.2 trillion.