2022 was the worst calendar year on record for Australian house prices, according to the CoreLogic daily dwelling values index.
Home values across the five major capital city markets fell by 1.2% in December, which was the eighth consecutive monthly decline:
The December decline in home values was driven the three largest capital cities, namely Sydney (-1.4%), Melbourne (-1.2%) and Brisbane (-1.4%):
Over the fourth quarter of 2022, home values declined by 3.3% at the 5-city aggregate level, led by Brisbane (-5.0%), Sydney (-4.0%) and Melbourne (-2.9%):
Home values are now 8.7% below their peak at the 5-city aggregate level, with Sydney (-12.7%), Brisbane (-9.2%) and Melbourne (-8.3%) each experiencing the largest price falls:
Finally, home values declined by 7.1% at the 5-city aggregate level over the 2022 calendar year, driven by Sydney (-12.1%) and Melbourne (-8.1%). This was the largest calendar year price fall on record, eclipsing the 6.5% decline recorded in 2008 and the 6.4% fall posted in 2018:
Australian home values are expected to continue falling in 2023 on the back of the delayed impact from the Reserve Bank of Australia’s (RBA) aggressive 3.0% of monetary tightening, alongside further expected hikes.
These interest rate hikes have already increased variable mortgage repayments by around 40%, and reduced borrowing capacity by around one-third.
This higher cost of debt (mortgage rates) and reduced borrowing capacity necessarily means lower house prices. The equation is that simple.
For this reason, I do not expect house prices to begin rebounding until late 2023 after the RBA starts to cut interest rates.
