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The housing market is experiencing a significant downturn, with national property values falling by 1.1% in September and 5.2% since the March peak. This decline is driven by rising interest rates and recent curbs on investor tax breaks, though the overall financial stability of mortgage holders remains relatively high.
The housing market is nearing the largest downtown in four decades.downturn is on track to become the deepest of the past 40 years after a sixth straight month of nationwide declines.
National Property Values Plummet 1.1 Per Cent
National property values plunged 1.1 per cent in September, taking the total losses since the March peak to 5.2 per cent, data firm Cotality revealed on Thursday. Know the news with the 7NEWS app: Brisbane overtook Sydney as the city with the steepest monthly fall, down 1.5 per cent compared to Sydney's 1.4 per cent.is now deeper than at the same stage of the 2022/23 downturn, Cotality research director Tim Lawless said.
"This is just a little bit more rapid than what we're seeing through that previous period of decline, which was one of the largest corrections on record," he told AAP. "But it was really short and sharp. I think this one's quite sharp, clearly, but I'm not sure how short it's going to be.
" Several market economists have already forecast property prices to fall by between nine to 13 per cent, from peak to trough.rate rises a strong possibility and no cuts expected until at least late 2027, there's a real risk the downturn could run even further, Lawless said. The Australian housing market has continued to fall with RBA rate rises pushing prices lower. As interest rates continue to climb, the downturn is not only deepening. It's widening too.
Investor Activity Declines Amid Tax Cuts
Over the three months to the end of September, 97 per cent of capital city suburbs were down in value. While the lower quartile of the market was holding up stronger in the early stages of the downturn, pockets of resistance were increasingly disappearing.
"You could probably add to this broad-based downturn the fact that investors have become much less active than they used to be," Lawless said. While rising interest rates were having a larger influence on prices, Labor's curbs to investor tax breaks in the federal budget were also having an impact.
"Once the dust finally settles, maybe around the middle of next year, then fresh home buyers will probably be in a situation where housing is more affordable and there's less competition with investors," Lawless said. The downturn has impacted all but three percent of suburbs in all capital cities, due in part to Labor's curbs to investor tax breaks in the federal budget.
Borrowers Possess Sufficient Cash Flow Resilience
Less than one per cent of borrowers are estimated to be facing negative equity despite soaring interest rates, theMortgage holders, whacked with a 25 basis point rate hike on Tuesday, are realistically capable of absorbing shocks to the market, the bank's half-yearly Financial Stability Review said. Despite a steep six-month price decline, the bank reported most Australians have sufficient cash flow and savings to mitigate downturns.
In fact, housing prices could fall 20 per cent from current levels and only around five per cent of mortgages would fall into negative equity, RBA modelling suggests. The deepest downturn predictions by mainstream economists, such as HSBC chief economist Paul Bloxham, are around 13 per cent peak to trough.
The RBA, however, believes that less than one per cent of borrowers will be facing negative equity after it rose rates by .25 per cent on Tuesday.numbers showed arrears rates generally remained low, and lenders have maintained high standards since the regulator instated a three per cent buffer. The post-pandemic house price run also meant the vast majority of owners have positive equity, the bank said.
RBA Report Highlights Sector Resilience
''In short, while there are pockets of stress in the household and business sectors, both sectors display a good level of resilience overall,'' it said. ''The risks associated from them remain contained, as far as the RBA is concerned,'' the report said. ''Banks' exposure remains limited, as they involve small companies and companies with little bank debt.
'' The report comes after the RBA lifted interest rates for the first time in a decade, sending them to a two-year high of 1.50 per cent.
Housing Market Downturn Interest Rates Property Prices Negative Equity Financial Stability RBA Investor Tax Breaks
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