Australian home values fall for seventh month as downturn spreads

Australian home values declined for a seventh straight month in October, with prices across the capital cities falling at their fastest pace in 40 years. Figures from Cotality showed combined home values in the state and territory capitals dropped 1.4% during the month, as rising mortgage rates discouraged buyers.

Brisbane and Perth recorded the sharpest October falls, signalling a shift in the centre of the downturn away from Sydney and Melbourne. Cotality research director Tim Lawless said the decline had become widespread, with capital city values now 8.1% below their March levels. Almost every suburb in Brisbane, Perth and Adelaide had experienced a fall over the past three months, following six years of exceptional growth in the mid-sized capitals.

Four interest rate increases this year have weighed on the market, and a fifth is widely expected when the Reserve Bank announces its decision on Tuesday. Most economists expect Australian property prices to suffer double-digit declines as rates rise. Morgan Stanley forecasts a fall of as much as 15% from peak to trough. Lawless identified high rates as the strongest downward pressure, alongside affordability constraints and reduced investor demand following government tax changes.

Lawless said the unusually rapid decline also reflected the strength of the market’s earlier gains. Australian house prices began pulling away from wages in the late 1980s, then rose sharply through the 1990s and early 2000s. Tax arrangements favourable to investors, which were only recently unwound, compounded the resulting affordability problems.

Over the past decade, prices have doubled or come close to doubling in Adelaide, Brisbane, Perth and Hobart. Canberra has recorded gains above 50%, while Sydney and Darwin have risen more than 30% and Melbourne just over 20%. Those increases leave most owners with substantial gains despite the recent falls. Cotality’s analysis suggests that even a 20% decline from Perth’s peak would return values only to their levels in mid-2025.

Peter Esho, an economist and chief executive of 13x, said Sydney and Melbourne appeared to be nearing the bottom of their downturns, while the mid-sized capitals were at an earlier stage. He described the falls as part of a normal housing cycle, with interest rates reducing perceived wealth and weakening confidence. Esho said he did not expect a systemic downturn, which he believed would require either a surge in unemployment or borrowing difficulties like those seen in the US during the global financial crisis.

Conditions in the rental market have eased somewhat, according to Cotality, with vacancy rates increasing nationally and rental growth slowing. Nevertheless, rents have risen more than 50% in six years, adding roughly $245 a week to the median rental rate and substantially outstripping wage growth.

Analysts attribute some of the increase in vacancies to renters adjusting their living arrangements to manage costs. More are sharing properties or moving in with family, reversing the pandemic-era move toward smaller households with space for a home office.