CoreLogic’s daily dwelling values index, which tracks price movements across the five major capital city markets, fell another 0.29% in the week ended 22 December.
This was the 33rd straight weekly fall. The speed of decline has also accelerated, averaging -0.30% over the past four weeks against -0.23% in the four previous weeks:
Three weeks into December, dwelling values at the 5-city aggregate level have declined by 0.91%, driven by the three largest capital city markets: Sydney (-1.10%), Melbourne (-1.02%) and Brisbane (-1.16%). By contrast, values in Adelaide have only fallen modestly (-0.17%), whereas Perth values have risen (+0.10%):
The quarterly pace of decline remains swift, with values down 3.4% at the 5-city aggregate level. Brisbane (-5.2%) is leading the decline, followed by Sydney (-4.1%) and Melbourne (-2.9%):
Dwelling values have now fallen 8.6% from their peak at the 5-city aggregate level, led by Sydney (-12.5%), Brisbane (-9.2%) and Melbourne (-8.1%):
As shown in the next chart, which plots values at the 5-city aggregate level, all of the decline has occurred following the first interest rate hike from the Reserve Bank of Australia (RBA) in early May:
The major factor pushing house prices lower is the rising cost of debt and the associated reduction in borrowing capacity.
According to Finder, the amount of pre-tax income needed to service a $500,000 mortgage has ballooned from around $121,000 in April 2022 to $181,000 as at December, following the RBA’s 3.0% of interest rate hikes:
Lower borrowing capacity equals lower house prices. And the more the RBA hikes interest rates, the further house prices will fall. The equation is that simple.
