Massive house price slowdown as interest rate climbs
After experiencing near-record high prices during the pandemic, the cost of a house in Australia’s capital cities is experiencing its biggest slowdown since 1989, according to new data.
The slowdown in price growth over the past six months is worse than the stagnation and turbulence the housing market experienced in 2004 and 2008’s Global Financial Crisis.
According to new analysis from PropTrack, the annual rate of home price growth in capital cities has dropped from January’s rate of 24 percent, to 14 percent.
PropTrack has reported that Sydney prices have slowed at the fastest rate since 1989, Melbourne’s is the slowest since 2010 and Brisbane’s since 2008.
Economist Paul Ryan told 9News the slowdown was “not surprising”, blaming recent interest rate rises and predicting it would continue due to additional rises expected over the rest of the year.
“Looking ahead, the rapid slowdown in price growth signals the housing market is likely to continue to see slow growth over the rest of 2022,” he said.
He added that buyers may be hesitant with the high level of uncertainty around the cost of mortgage repayments.
“Resolving this uncertainty about the path of interest rates will be the key element buyers look for over the rest of the year,” he continued.
Though it is normal for prices to decline after a period of growth, Ryan said this sudden six-month deceleration was of potential concern.
“It’s not necessarily the case that growth falls rapidly after a run-up,” he said.
“In general, the market moves more gradually, indicating there are other factors involved.”
It comes after the Reserve Bank lifted the nation’s interest rates by 0.5 percent on Tuesday, making it the second month in a row with an increase.
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