{"id":3189,"date":"2022-08-06T09:26:27","date_gmt":"2022-08-06T09:26:27","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/property-price-falls-spread-to-regional-australia-in-july\/"},"modified":"2022-08-06T09:26:27","modified_gmt":"2022-08-06T09:26:27","slug":"property-price-falls-spread-to-regional-australia-in-july","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/property-price-falls-spread-to-regional-australia-in-july\/","title":{"rendered":"Property price falls spread to regional Australia in July"},"content":{"rendered":"

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Australia\u2019s property prices fell further again throughout the nation in July as higher borrowing costs and fast-rising interest rates drive down demand.<\/p>\n

Across the country, property prices dropped another 0.43% in June to a new $751,000 median, and are now 1.66% below their peak, according to the latest PropTrack Home Price Indicator<\/a> report.<\/p>\n

Prices continued to decline in Sydney<\/a> (-0.70%) and Melbourne<\/a> (-0.59%) with both markets now down over 3% from their peaks.<\/p>\n

\"Falling<\/p>\n

But prices in Adelaide (the only market to have avoided price falls so far in 2022) and Perth bucked the trend to be the only capital cities to see property price increases in July, although this is expected to be temporary with price falls likely in the months ahead.<\/p>\n

And the price falls now extend to regional areas, with prices in all eastern states\u2019 regional markets declining.<\/p>\n

Combined regional areas fell 0.18% in July and are 0.5% below the price peak set in April 2022.<\/p>\n

Despite recent price falls, regional areas remain up almost 50% since the start of the pandemic: Capital cities are up almost 30%.<\/p>\n

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

Significant interest rate increases by the Reserve Bank of Australia<\/a> (RBA) have pushed rates up by 1.25 basis points since May, with further increases widely expected in early August and beyond.<\/p>\n

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\u201cWe expect these borrowing cost increases to continue to drive home prices lower over the second half of 2022 and throughout 2023,\u201d<\/em> REA economist and the report\u2019s author, Paul Ryan<\/a> said.<\/p>\n<\/blockquote>\n

But these price falls follow significant increases over the past two years – regional areas are still up almost 50% since the start of the pandemic, with capital cities up almost 30%.<\/p>\n

Regional markets take a hit, especially in our eastern states<\/span><\/h2>\n

PropTrack\u2019s data shows that regional markets have outperformed capital cities, with prices up 16.5% over the past year, relative to 5.7% in the capitals.<\/p>\n

That\u2019s because these areas have benefited from relative affordability and preference shifts towards lifestyle locations and larger homes following the pandemic.<\/p>\n

But it seems even these areas aren\u2019t immune from the declining market – price decreases have now extended widely across regional markets, which are now down 0.5% from their peak, with all eastern seaboard regional areas seeing falls in July.<\/p>\n

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

Sydney and Melbourne are now down 3% from their peak<\/span><\/h2>\n

National annual growth in our national property markets is 8.5% in the year to July 2022.<\/p>\n

Capital cities are up 5.7% over the same period whereas prices in regional markets are 16.5% higher than last July.<\/p>\n

It comes as no surprise that Australia\u2019s most expensive property markets – Sydney, Melbourne, and the ACT – are leading the price falls.<\/p>\n

Prices have fallen more than 3% from their peak in Sydney and Melbourne.<\/p>\n

In Sydney, prices are now only up 2.5% over the past year, while Melbourne is up 2.4% over the same period.<\/p>\n

This is likely because larger mortgages in these regions may mean higher interest rates, and uncertainty about how much higher they will rise, is impacting these regions the most, Ryan explains.<\/p>\n

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

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Brisbane<\/a> and Adelaide continue to be the strongest markets over the past year, with prices up 21.3% and 21.2% respectively.<\/p>\n

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\u201cThere continues to be a wide gulf between growth in capital cities and the regions, with smaller falls so far posted in the more affordable regions,\u201d <\/em>Ryan said.<\/p>\n<\/blockquote>\n

By property type, the data shows that prices in both houses and units fell a similar amount in July nationwide.<\/p>\n

But, the COVID-19 pandemic instigated a surge in demand for more space and has led to house prices (up 9.5% over the year) outperforming units (up only 3.5%).<\/p>\n

\"04\"<\/p>\n

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

National prices have now fallen for four consecutive months, with the decline spreading over the majority of the country in July.<\/p>\n

Strong inflation has forced the RBA to increase interest rates rapidly, at the fastest pace since 1994 and more cash rate increases are expected throughout the remainder of 2022 which will continue to constrain borrowing capacity and increase borrowing costs.<\/p>\n

Based on this, Ryan said he expects continued price falls, particularly in Sydney and Melbourne.<\/p>\n

\"Property<\/p>\n

While Brisbane, Adelaide, and regional parts of the country are expected to outperform, spurred by relative affordability and preference shifts, tighter financial conditions are expected to bring persistent price falls here too.<\/p>\n

Over the longer-term, increased investor activity, as well as immigration, is likely to benefit the large cities.<\/p>\n

Preference shifts since the pandemic have also made both inner-city locations and apartments relatively cheap, which comprise the types of homes investors and recent immigrants often prefer.<\/p>\n

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\u201cAs has been clear over recent months, the speed of wages growth, interest rate hikes, and uncertainty about the extent they will increase throughout this cycle remain the key unknowns for prices going forward,\u201d <\/em>Ryan said.<\/p>\n<\/blockquote>\n

But all this creates a window of opportunity<\/span><\/h2>\n

Currently I see a window of opportunity for property investors with a long-term focus.<\/p>\n

This window of opportunity is not because properties are cheap, however when you look back into a three years time the price you would pay for the property today will definitely look cheap.<\/p>\n

The opportunity arises because consumer confidence is low and many prospective homebuyers and investors are sitting on the sidelines.<\/p>\n

However I believe later this year many prospective buyers will realise that interest rates are near their peak, and inflation will have peaked and the RBA’s efforts will bring it under control.<\/p>\n

And at that time there will be a release of pent up demand as greed (FOMO) overtakes fear (FOBE – fear of buying early), as it always does is the property cycle moves on.<\/p>\n

We saw an opportunity like this since late 2018 – early 2019 when fear of the upcoming Federal election stopped buyers entering the market. And look what’s happened to property prices since then.<\/p>\n

History has a way of repeating itself.<\/p>\n

Strategic investors will take advantage of the opportunities our property markets will offer over the next couple of years maximising their upsides while protecting their downsides.<\/p>\n