Last year, Australia’s housing market experienced its largest annual decline since 2008, as sharp interest rate increases sapped purchasing power and turned off investors.
CoreLogic Inc. reported Tuesday that the national Home Value Index fell 5.3% in 2022, the first drop since 2018. The biggest annual drop was in Sydney, which fell 12.1%, followed by Melbourne, which fell 8.1%. According to the report, national prices fell 1.1% in December.
According to Tim Lawless, research director at CoreLogic, home values could fall further in the early months of 2023 before stabilising after interest rates peak.
The Reserve Bank of Australia has raised interest rates by three percentage points since May, to 3.1%, and is widely expected to do so again this year. RBA officials have generally expressed confidence in the Australian housing market, pointing out that prices are still higher than when the pandemic began. Furthermore, with unemployment at its lowest in nearly 50 years, borrowers are well placed to meet their obligations, and loan arrears are likely to be limited.