Australian capitals continue 6-month slide

Nationally, property values fell 1.1 per cent in September and 3.7 per cent over the quarter, with prices flat annually.

The result marked the sixth consecutive month of falls, with data showing that almost every capital city recorded a decline in September, excluding Darwin, alongside more than 70 per cent of regional SA3s.

Cotality research director Tim Lawless said almost all capital city suburbs recorded negative growth over the rolling three-month window.

“97 per cent of capital city suburbs were down in value over the three months to the end of September, highlighting the broad-based scope of this negative housing cycle,” Lawless said.

He said the national downturn reflected a combination of affordability constraints, higher interest rates and weaker consumer sentiment, all of which had reduced purchasing power and dampened buyer demand.

Impact on industry professionals

The data showed agents were competing for a smaller pool of new listings, with home sales over the past three months tracking 19.1 per cent lower than a year ago and 13.3 per cent below the five-year average.

Brisbane was the capital hardest hit by the decline in sales activity, with volume down 27.2 per cent compared to a year ago.

Listings in Sydney and Perth also fell sharply, down 26.5 per cent and 24.2 per cent, respectively.

“The sharp drop in sales has some implications for the broader economy, with lower sales likely to hit some retail segments as well as stamp duty revenues for some governments,” Lawless said.

“Despite fewer new listings entering the market, inventory levels have risen sharply because the rate of sale has fallen even faster.”

He said the increase in stock had become evident in capital city markets, with homes now taking a median of 39 days to sell, compared to 23 days a year ago.

“The lift in available stock is improving choice for buyers, but ironically, many prospective buyers don’t have the confidence or financial capacity to buy at the moment.”

Across the capitals

While Darwin’s property market continued to grow at a moderate rate, the picture was bleaker for the other capitals.

Darwin recorded a growth of 0.4 per cent over September and 0.5 per cent over the quarter.

The combined capitals recorded a 1.2 per cent fall in September, and 4.3 per cent over the past three months.

The data found that Brisbane recorded the sharpest monthly decline, with values falling 1.5 per cent in September, edging out Sydney’s 1.4 per cent decrease.

“The result highlights how sharply conditions have shifted in what had previously been one of the strongest performing housing markets,” Lawless said.

Property values in Adelaide, Perth and Canberra all fell by more than one per cent over the month, while Melbourne saw a milder decline of 0.7 per cent.

Sydney continues to lead the housing correction, with property values 8.6 per cent below their February peak.

“The decline is marginally deeper than the equivalent stage of the 2022–23 downturn, highlighting how rapid demand has weakened across the nation’s largest housing market,” he said.

Looking down the road

Lawless said the housing market would likely remain under downward pressure in the coming months, with the Reserve Bank of Australia’s recent rate rise hike adding to the economic headwinds.

He said the cash rate change would affect housing demand through several channels, including reduced borrowing capacity and increased repayment pressure for existing mortgage holders.

“With household debt at high levels, borrowers are far more sensitive to interest rates compared with almost 15 years ago when interest rates were previously this high,” he said.

“Borrowers are not only facing higher mortgage costs, but also an extended period of elevated living expenses and negative real income growth.

“Together, these pressures are narrowing the pool of buyers able to qualify for a mortgage and reducing the amount they can afford to pay.”

Lawless said that, despite affordability, low consumer confidence and changes to taxation policies adding downward pressure to the housing market, several factors could help contain the downturn.

He said the tightness of the labour market, combined with limited housing supply, would help ensure the market didn’t enter a downturn.

According to Lawless, elevated construction costs and project feasibility challenges continue to limit new housing supply.

Even with improved approvals and commencements, Lawless said lengthy development and construction timelines meant it would take time for the uplift to translate into completed dwellings.

Overall, he said the balance of risks had shifted more firmly to the downside, with high interest rates, reduced borrowing capacity, weak sentiment, and less favourable tax settings for investors continuing to weigh on demand.

“The most likely outcome remains a gradual drift lower in housing values rather than a material downturn, with conditions continuing to vary significantly across the regions, price points and buyer segments,” Lawless said.