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The nation’s homes have lost $34 billion in value in three months as interest rates and the federal government’s overhaul of property taxes started to bite and consumers become increasingly worried about the economic outlook on everything from petrol prices to their job prospects.
After a four-year property price surge that pushed the value of the country’s houses, units and apartments beyond $12.7 trillion, the Australian Bureau of Statistics reported on Tuesday that they had slipped by 0.3 per cent through the June quarter.
The drop was concentrated in NSW, where values fell by $92.9 billion to $4.6 trillion, Victoria ($44.3 billion) and the ACT ($1.4 billion). Values lifted in every other part of the country, led by Queensland, where they climbed by $49.7 billion, and Western Australia ($34 billion).
Despite the drop, the value of all Australian homes is still $1 trillion, or 8.5 per cent, up on the same period last year. Since the bureau started tracking home values in 2012, they have fallen on just nine occasions.
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The June decline was the smallest fall in 14 years and followed a $214 billion increase through the first three months of the year.
The fall covers the full impact of the Reserve Bank’s three interest rate rises, which started in February, plus the initial fallout from May budget when the government revealed plans to overhaul negative gearing and capital gains tax concessions.
While overall values are falling, median house prices remain at near historic highs. Sydney’s median house price was almost $1.5 million, a $33,000 drop on the same period last year.
Median prices were higher over the year in every other capital, with Brisbane ($1.15 million), Perth ($1.01 million) and Canberra ($1.03 million) all over the $1 million mark. Adelaide is at $975,000.
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A spokesperson for Treasurer Jim Chalmers noted home values were up $2.7 trillion over the past four years.
“While the total value of dwellings did step back this quarter, it is still up over the past year and more than 25 per cent higher than four years ago,” they said.
The number of homes in the country increased by 54,400 through the quarter, the biggest three-month lift since 2018. Every state and territory reported an increase, led by 17,100 in NSW and 16,400 in Victoria.
The Reserve Bank’s chief economist, Sarah Hunter, on Tuesday acknowledged this year’s interest rate increases had contributed to the drop in prices that was likely aiding its efforts to curb inflation.
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“Those three rate hikes at the start of the year, we understand and we know cyclically that will put some downward pressure on house prices and will slow things down a bit in the housing sector more broadly,” she told the Australian Financial Review’s property summit in Sydney.
“That is part of what we’re trying to achieve through transmission. We’re trying to cool things off a bit, if you like, to bring inflationary pressures back down.”
The slowdown in the property market, however, is one of a series of factors hitting the nation’s shoppers.
The Westpac-Melbourne Institute measure of consumer sentiment plunged 5.2 per cent this September to be down almost 12 per cent over the past 12 months.
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Westpac’s head of macro-forecasting, Matthew Hassan, said the recent sharp lift in petrol prices, higher inflation, the fall in property prices and the fear of more interest rate hikes were all weighing on consumers.
Oil prices on Tuesday reached their highest level since June, nearing $US100 a barrel, with prices at the bowser now sitting above $2 a litre across the country for the first time since April.
“A stronger-than-expected monthly CPI read in July has stoked fears that the RBA will raise interest rates further in coming months. This has weighed on consumer expectations for finances and the economy. It has likely also added to unease about the continued weakening in housing markets,” Hassan said.
Despite the upheaval in the property market, Hassan said the survey showed a third of people expect prices to fall over the next 12 months, 20 per cent believe they won’t change while 42 per cent agreed they were likely to start climbing.
But there are signs that local businesses are starting to pay the price for this year’s economic turmoil.
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NAB’s closely watched monthly business survey showed a two-point fall in confidence last month while trading conditions dropped into negative territory for the first time in six years.
Profitability, capacity utilisation, labour costs and product prices all fell through the month.
Trading conditions and confidence are weakest in the retail sector while the only parts of the economy in positive territory are mining, transport and real estate.
AMP economist My Bui said the survey’s results were a cause for concern.
“This means that rate hikes are working, just not yet enough to contain inflation,” she said.
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Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.AdvertisementAdvertisement