House values plummeting

House values in some parts of the country are falling by almost A$1000 (NZ$1117) a day as the Reserve Bank’s war on inflation sweeps across the nation’s property market, amid warnings prices will continue to drop as long as interest rates are pushed higher.

Data released yesterday by Corelogic shows values falling through August in every capital city except Darwin, led by Sydney suffering the biggest drop in the nation at 2.6%.

It was the fifth consecutive monthly fall for the Sydney market, taking the median value since the end of April down by A$114,000 to A$1.3 million, a reduction of A$927 a day.

The situation is similar in Melbourne, where house values fell another 1.5% in August to be down 4.4% over the past three months. Melbourne’s median house value has fallen by more than A$51,000 over the same period, or A$415 a day, to A$949,000. In August, one of the biggest hits to values was in Brisbane, which along with Adelaide and Perth had previously defied the recent property market cooling. Brisbane house values slipped by 2.1% in August, although they are still up by 18.1% over the past year.

Corelogic’s research director,

Tim Lawless, said it appeared the property market would continue to struggle while the Reserve Bank tightened monetary policy.

‘‘It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,’’ he said.

‘‘From current levels, interest rates are likely to increase by at least another 75 basis points and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values.’’

Despite the recent falls in values, they have only knocked off a small proportion of the Covid period surge. Sydney dwelling values lifted by 27.7% through the pandemic and have fallen by 7.4% since that peak, while in Melbourne they increased by 17.3% and given back 4.6%.

The RBA lifted interest rates for the first time in 12 years in May. Since then, it has increased the official cash rate by 1.75 percentage points and markets are expecting another half percentage point when the RBA board meets next week.

The bank’s corporate plan for the 2022-23 financial year, released on Wednesday, signalled the RBA remains focused on bringing inflation – expected to nudge 8% by year’s end – to heel.

In a substantial departure from previous RBA corporate plans, the bank made explicit reference to its commitment to reaching its inflation target.

‘‘A major priority for the Reserve Bank is to return inflation to the 2 to 3% range over time while keeping the economy on an even keel. It is possible to do this but the path ahead is a narrow one and clouded in uncertainty,’’ it said.

‘‘Inflation is expected to increase further over the course of 2022 and be back around the top of the 2 to 3% target range by the end of 2024. Higher interest rates will assist with the return of inflation to target over time.’’

While some economists have expressed concern about the impact of the RBA’S aggressive lift in interest rates, data collated by the Australian Prudential Regulation Authority suggests households are continuing to save money.

– Nine