SYDNEY, July 1 - Australian housing values experienced their most pronounced monthly decline in three-and-a-half years in June as rising borrowing costs and tax policy changes on investment properties weighed on buyer activity.
Data published by Cotality showed national prices dipped 0.4% in June compared with May - the largest single-month fall since December 2022 - although values remained 7.3% higher so far this year. Cotality also applied downward revisions to previous months that indicate prices peaked in March and that the second quarter ended 0.7% lower.
Sydney and Melbourne were the main contributors to the monthly slide, with prices falling 1.2% and 1.0% respectively. Among the mid-sized capitals, Adelaide recorded no change, Brisbane rose 0.3% and Perth gained 0.7% in June.
The slowdown follows a sustained run-up in national property values of more than 30% over the past five years, a rise that persisted despite COVID-19 lockdowns and the subsequent escalation in borrowing costs intended to rein in inflation.
"Even before interest rates rose by seventy-five basis points, we were seeing affordability hurdles weighing on buyer demand," said Cotality's research director Tim Lawless. "Higher cost-of-living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget are all contributing to weaker housing conditions."
The Reserve Bank of Australia noted that the housing market had eased and that housing credit growth appeared set to slow as the effects of three rate hikes implemented from February worked through the economy. The central bank also warned there are risks of a potentially material weakening in the housing market, a development that could restrain consumer spending.
Separate lending data highlighted the downshift in demand. Equifax reported that mortgage inquiries fell 6.6% in the five months to May compared with the same period a year earlier, a larger decline than the 0.9% drop seen for January-April. Enquiries from first home buyers plunged 9.1% over the same five-month comparison.
Auction clearance activity also cooled: clearance rates across capital cities slid to 47.4% last week, the weakest level since April 2020, when COVID lockdowns brought much of the economy to a halt. Sales volumes in the capital cities for the June quarter were 16.2% lower than in the same quarter a year earlier.
A sustained reduction in housing turnover carries implications beyond residential values because the housing sector is interconnected with industries such as real estate services and construction, among others.
Independent measures of housing prices point to the same trajectory. PropTrack's figures showed home values declined for a third consecutive month in June, falling 0.3% over the month, while remaining 5.8% higher than a year earlier.
These indicators together paint a housing market that is cooling under the combined pressure of higher interest rates, stretched affordability and recent taxation measures affecting investor demand. How deeply activity and consumer spending are affected depends on the persistence of these trends.