Nerida Conisbee Chief Economist Ray White Group
THE PARTS OF AUSTRALIA THAT ARE DEFYING THE DOWNTURN ( AND WHY )
Capital city house prices are now down 6.1 per cent from their peak in March 2022 . While we may not be at the end of declines , the rate of decline is clearly slowing . With interest rates still expected to rise , it ’ s likely that greater certainty around the inflation peak is a driver .
House prices move closely with interest rates but they don ’ t move exactly . House prices began declining in March 2022 even though rates didn ’ t start increasing until May 2022 . Once it became apparent to buyers that the days of ultra low interest rates were over , price expectations were adjusted downwards . It ’ s likely that house prices will start to stabilise before the cash rate peaks .
Some markets are also less sensitive to interest rates . Sydney , Melbourne and Canberra are our most expensive cities and as a result are far more sensitive to the cost of debt . Sydney house prices have now fallen by 10.8 per cent from their peak in February 2022 . Compare that with Adelaide where the median is half that of Sydney - prices are down only 1.8 per cent from peak . Resource capitals Perth and Darwin have seen similarly small declines .
At a small area level , the difference between what ’ s happening is even more stark . The capital city areas still recording year on year increases are all relatively affordable suburbs in Brisbane and Adelaide . Both of these cities recorded net interstate migration during the pandemic . Most people that moved during this time initially rented and a shift from renter to buyer is likely to be in part driving price growth . At a regional level , the areas seeing growth tend to be more affordable holiday destinations , as well as towns that are benefitting from strong agricultural and mining conditions .
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