Property prices across Australia stalled in April and with further rate rises to come, will prices start to gradually fall?

PropTrack’s latest Home Price Index showed a 0.13% national growth in home prices in April, bringing the median to $691,000.

Over the month, regional areas posted stronger gains monthly and annually than capital cities.

In fact, prices have increased 23% in the past year in regional areas, compared with only 14% in the capitals.

Some regions have already posted monthly declines in home prices, with Hobart reporting the steepest drop at 0.44%, followed by regional Western Australia at 0.25%, and Sydney at 0.1%.

The overall price growth in April was the weakest since May 2020 at the onset of the pandemic.

PropTrack economist Paul Ryan said the slowing in home price growth is due to widespread expectations of higher interest rates in 2022.

“This will erode the affordability that record-low rates brought following the onset of the pandemic,” he said.

“The outlook for price growth remains subdued, with the speed of official interest rate hikes and wages growth the key determinants of conditions.”

Here are some of the highlights across capital cities over the month:

  • Sydney – Prices fell on a monthly basis for the first time since early in the pandemic, as the momentum in the city continued its slowing that started mid-2021.
  • Melbourne – The city has witnessed almost no movement in home prices for two months now.
  • Brisbane – Price growth in the city have slowed to around half of the decade-average, but it is still one of the strongest across the country.
  • Perth – While it reported a solid growth in April, Perth continues to be the weakest capital city market on an annual basis.
  • Adelaide – This city registered the highest growth in the month and the second best record on an annual basis next to Brisbane.
  • Darwin – Conditions are stabilising in Darwin after a rapid slowdown in the latter part of 2021.
  • Hobart – The city reported its first monthly decline in prices since 2018.
  • ACT – The home price index for Canberra was flat in April, but it continues to be one of the strongest-performing capital city.

Rate hikes add pressure on housing

CoreLogic research director Tim Lawless said higher interest rates are set to add to the downwards pressure on housing growth rates, which are already losing steam particularly in Sydney and Melbourne.

“As the cash rate normalises, we can expect housing markets to lose further momentum,” he said.

Citing past research from the RBA, Mr Lawless said the higher end of housing markets with higher investor concentrations are more sensitive to changes in interest rates in the short term.

“This may be why Sydney and Melbourne markets are already seeing price declines, with more affordable housing markets expected to eventually follow the downward trend,” he said.

Still, Mr Lawless believes that the extent of a potential housing downturn would not just depend on how high or how fast interest rates rise but also on other factors.

“Labour markets are currently showing the lowest unemployment rate since the mid-1970s, and conditions are set to tighten further,” he said.

“Such a low unemployment rate, along with an expectation for higher income growth, should keep mortgage distress and forced sales at relatively low levels.”

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