{"id":2989,"date":"2022-07-06T02:33:55","date_gmt":"2022-07-06T02:33:55","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/higher-borrowing-costs-weigh-heavily-on-property-prices\/"},"modified":"2022-07-06T02:33:55","modified_gmt":"2022-07-06T02:33:55","slug":"higher-borrowing-costs-weigh-heavily-on-property-prices","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/higher-borrowing-costs-weigh-heavily-on-property-prices\/","title":{"rendered":"Higher borrowing costs weigh heavily on property prices"},"content":{"rendered":"

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Australia\u2019s property prices fell further throughout the nation in June as higher borrowing costs and rising interest rates weighed heavily on the market.<\/p>\n

Nationwide, property prices dropped another 0.25% in June to a new median of $716,000, according to the latest PropTrack Home Price Indicator<\/a> report.<\/p>\n

Prices continued to decline in Sydney<\/a> (-0.40%) and Melbourne<\/a> (-0.61%), while prices in Brisbane<\/a> dropped for the first time since the pandemic began in early 2020.<\/p>\n

\"Price<\/p>\n

And monthly price growth has slowed almost everywhere across the country, with widespread falls in June.<\/p>\n

Regional areas continue to outperform capital cities, although some regional markets declined throughout the past month.<\/p>\n

While prices are down only 0.55% from their peak in March, an outsized interest rate increase by the Reserve Bank of Australia<\/a> (RBA) in early June and expectations for much higher rates later in the year continue to slow all markets – with widespread falls seen in June, according to the report\u2019s author, REA economist Paul Ryan<\/a>.<\/p>\n

\"01\"<\/p>\n

But while the data may be alarming for some, Ryan also adds that this fall follows the third-fastest episode in Australia’s history, with prices up 11.5% in the year to June, and 34% since March 2020 – the start of the pandemic.<\/p>\n

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\u201cPrices adjusted quickly to the reduction in borrowing costs as the pandemic shocked the economy and interest rates fell to their lowest level on record,\u201d<\/em> he said.<\/p>\n<\/blockquote>\n

The two-speed housing market worsens<\/span><\/h2>\n

We\u2019re already seeing that property price growth is slowing in some areas and falling sharply in others.<\/p>\n

We\u2019re already aware that Australia is seeing a two-speed<\/a> housing market.<\/p>\n

There are houses, apartments, townhouses, and villa units located in the outer suburbs, middle ring suburbs, inner suburbs, and the CBD.<\/p>\n

And they’re all behaving differently.<\/p>\n

And the PropTrack data shows that this is continuing, or even worsening.<\/p>\n

The biggest slowdowns have been in the most expensive markets of Sydney, Melbourne, and the ACT.<\/p>\n

Capital city markets in aggregate fell in the month (-0.35%), the report reveals.<\/p>\n

This makes another flat result in regional areas look relatively strong.<\/p>\n

Notwithstanding, this represents a sharp slowdown and the slowest monthly result since May 2019 in regional areas.<\/p>\n

Regional areas have benefited from relative affordability and preference shifts towards lifestyle locations and larger homes following the pandemic.<\/p>\n

Prices have increased 19% in the past year in regional areas, but only 9% in the capitals, the data revealed.<\/p>\n

\"02\"<\/p>\n

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And the strength in regional areas is particularly evident in Queensland, South Australia, and Tasmania, where growth has been above 20% outside the capitals over the past year.<\/p>\n

The smaller capitals of Brisbane and Adelaide have also seen strong growth off the back of the same trends.<\/p>\n

Brisbane and Adelaide have posted annual growth of close to 23% over the past year – bucking the trend amongst capitals in 2022.<\/p>\n

In June, houses and units fell by similar amounts nationally.<\/p>\n

However, the post-pandemic period has been typified by a desire for more space that has led to house prices (up 13% over the year) outperforming units (up only 6%).<\/p>\n

\"03\"<\/p>\n

Strongest price growth areas<\/span><\/h2>\n

Parts of Queensland – particularly peripheral regions of Brisbane and South East Queensland – dominate the list of Australia\u2019s highest-growth regions in the year to June.<\/p>\n

Queensland\u2019s Ipswich and Logan-Beaudesert came out on top with both areas enjoying 30.21% and 29.58% price growth over the year respectively.<\/p>\n

The north of Adelaide has now also snuck in to be the third strongest performing region across Australia over the past year with a 27.02% price growth, PropTrack\u2019s report reveals.<\/p>\n

Central West and the capital regions were the only 2 regions in New South Wales to make the list in 8th and 10th place respectively.\"04\"<\/p>\n

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\u201cLooking across the capitals, the outperformance of peripheral parts of cities is clear. With larger homes, and reduced commuting, these regions have increased in prominence over the post-pandemic period,\u201d <\/em>Ryan said.<\/p>\n<\/blockquote>\n

What next for property price growth?<\/span><\/h2>\n

National prices have now fallen over two consecutive months, with widespread falls seen in June.<\/p>\n

While prices are down only 0.55% from their peak in March 2022, an outsized rate hike in early June and expectations of much higher rates later in the year continue to slow all markets.<\/p>\n

And the report shows that price growth has slowed rapidly and over a short period of time –\u00a0 annual price growth has halved in the past six months to 11.5%.<\/p>\n

The RBA moved to increase official interest rates for the first time in more than a decade in early May, followed by a second consecutive increase in June and another expected in July.<\/p>\n

\"Rba\"<\/p>\n

And these cash rate increases have eroded buyer demand and weighed on price growth across the board.<\/p>\n

Going forwards, Ryan expects continued price falls in Sydney and Melbourne while Brisbane, Adelaide, and regional parts of the country are expected to out-perform, spurred by relative affordability and preference shifts.<\/p>\n

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\u201cHowever, if borrowing costs increase as much as some are expecting, even these markets will see sustained price falls in coming months,\u201d<\/em> he said.<\/p>\n

\u201cAs has been clear over recent months, the speed of official interest rate hikes and wages growth remains the key unknowns for price growth moving forward.\u201d<\/em><\/p>\n<\/blockquote>\n