$40,000 wiped off the value of the average house over winter

Property values are falling in almost every suburb in the country, with $40,000 wiped from the median value of the nation’s homes through winter as high interest rates, the federal government’s budget tax changes and low levels of affordability crunch the entire market.

Figures released by Cotality show the value of 93 per cent of all properties in capital city suburbs fell during winter, double the proportion that had gone backwards during autumn, creating an economic problem for the Reserve Bank and a political issue for the Albanese government.

Across the nation’s capital cities, dwelling values dropped by 1.1 per cent in August to be down by 3.7 per cent over the past three months. The median value slipped to $990,394 compared to the $1.03 million recorded at the start of winter.

Regional values are also falling, down by 0.4 per cent last month to be 1.2 per cent lower through the quarter.

The downturn is being driven by Sydney, where dwelling values dropped by 1.4 per cent in August to be down by a nation-leading 4.7 per cent through winter. The city’s median house value dropped by 1.8 per cent last month, taking it below $1.5 million for the first time in more than a year.

Values fell in every capital city bar Darwin, easing by 1.1 per cent in Melbourne and Canberra, 1 per cent in Brisbane, 0.8 per cent in Adelaide and Perth and by 0.2 per cent in Hobart.

Sydney and Melbourne values are down by 4.6 per cent and 4.7 per cent respectively from August last year. By contrast, values are still 15.6 per cent higher in Perth, by 14.6 per cent in Darwin and 10.8 per cent in Brisbane.

The nation’s property slowdown accelerated after Treasurer Jim Chalmers revealed changes to negative gearing and capital gains tax concessions in the May budget.

The government has said its changes are aimed at improving housing affordability for young Australians. Despite the drop in values this year, every city bar Melbourne is still up on where it was five years ago while values in Brisbane, Adelaide and Perth are more than double their 2016 levels.

But it has faced an increasingly strident political attack over the fallout from the tax changes, with the Coalition accusing the government of trying to “destroy” the wealth of Australians held in their homes.

House values, particularly among the most expensive properties, are falling fastest and are down by 3.3 per cent so far this year. By contrast, the values of units and apartments have slipped by 1.8 per cent through 2026.

Cotality’s research director Tim Lawless said values had now fallen for five consecutive months to sit 3.6 per cent below their peak in March.

He said demand across the entire market was falling while the number of homes up for sale was 24 per cent up on the same point last year.

“What started as a more concentrated easing across higher-value segments has now become a much
more generalised softening, with the vast majority of capital city suburbs recording some level of decline,” he said.

“The shift in selling conditions means buyers are generally facing less competition, while vendors are having to be more realistic on price as stock levels rise and days on market extend.”

Property prices started to slow in February when the Reserve Bank delivered the first of three interest rate hikes so far this year. Markets believe the bank will push the cash rate to 4.6 per cent by November to deal with high inflation.

The bank’s efforts to curb inflation have been challenged by the fallout from the war against Iran, with oil prices pushing up above the $US90 a barrel on Monday. The International Energy Agency warned global oil supply was likely to be down 4.3 million barrels a day this year with current inventories being drawn down “at a rapid pace”.

Figures released on Monday by the country’s prudential regulator showed growth in the value of investor mortgages held by the Commonwealth, Westpac, NAB and Westpac banks slowed through July in further confirmation that the budget changes have pushed many investors out of the property market.

Lawless noted that at the start of the slowdown in the market, values for low-priced homes – dominated by first home buyers – had held up. But even this sector was now in decline, with the situation not likely to improve through the spring selling season.

“Premium markets are still generally recording weaker conditions, but lower-priced housing is becoming less insulated as affordability pressures and softer demand weigh more evenly across the market,” he said.

“Even though values have already moved lower, the combination of sticky inflation, the prospect of higher rates and ongoing pressure on household budgets suggests demand is likely to remain subdued through spring.”

There are signs the rental market is easing, despite it remaining historically tight. The rental vacancy rate eased to 1.9 per cent, its highest level since January last year.

Asking rents, however, have climbed by 5.7 per cent over the past 12 months. They are now 39 per cent, or about $200 a week, up over the past five years.

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