Markets 
The national property market is in its deepest downturn since the Albanese government came to office as interest rates, high cost of living and the May budget’s changes to property taxes combine to wipe thousands of dollars off property values.
Figures released by Cotality today show dwelling values in the nation’s capitals dropped by 0.9 per cent through July, led by a steep fall in the value of houses in Sydney and Melbourne.
In Sydney, the median house value dropped 1.7 per cent last month to be down 5.9 per cent since the beginning of the year. Despite the fall, the median house value in Sydney remains above $1.5 million.
Melbourne’s house values fell by 1.4 per cent in June to be down 3.4 per cent over the past 12 months to $936,528. The city remains the weakest market in the country, with the median dwelling value – which includes houses, units and apartments – now 1.6 per cent down on where it was five years ago.
Both Sydney and Melbourne have been weak since the start of the year, with the fall in values accelerating since the Reserve Bank started lifting interest rates in February.
But all major capital city markets are now either slowing or have turned negative. Values dropped in Brisbane (0.6 per cent), Adelaide (0.1 per cent) and Canberra (1 per cent) in June while they improved by just 0.1 per cent in both Perth and Hobart.
The national median value of a dwelling edged down 0.7 per cent, its largest drop since late 2022, to $928,421.
Despite the fall, the national value has only retreated to where it was in March and remains almost $220,000 above its December 2022 level.
Cotality head of research Gerard Burg said a series of demand-side factors were hitting the property market. These included the RBA’s three rate rises, the high prices of every capital city and the May budget’s changes to property taxes, including negative gearing and capital gains tax.
He said cost-of-living pressures, including the lift in petrol prices, which climbed sharply through July, were also weighing on potential buyers. Petrol prices are expected to rise again from Monday as the government ends its fuel excise cut.
Burg said another factor was supply, as potential sellers held back their properties. Though this would likely put a floor under the entire market, he cautioned home values were likely to continue falling for some time.
“Potential vendors are shying away from the market, given the weaker conditions, resulting in a pullback in new listings of properties for sale,” he said.
“Combined with the constraints to housing construction, this supply-side response could limit how far home values fall in the current downturn.”
Cotality noted that the biggest falls in value have been among the most expensive properties. Values across the top 20 per cent of the market nationally fell by 3.2 per cent over the past three months. But at the bottom end of the market, dominated by first-time buyers, values increased by 0.3 per cent.
Official figures last week showed the largest number of new properties approved for construction in five years, with substantial jumps in NSW, Queensland and Western Australia.
AMP chief economist Shane Oliver said while more housing stock would come on to the market, it wasn’t enough to maintain downward pressure on property values.
He said on a trend basis, around 220,000 homes had been approved over the past 12 months.
“The trouble is that rate hikes, rising costs and project abandonments will likely see it rollover soon and completions continue to run at much lower levels such that the housing shortage will linger longer,” he said.
Despite the fall, property values are still well up over the past decade across the country. The smallest increase has been in Melbourne, where values are up by 29.5 per cent, while they have lifted by almost 50 per cent in Sydney.
The biggest increases over the past 10 years have been in Brisbane, Perth and Adelaide, where values have more than doubled.
The median value of a house remains above $1 million in Sydney, Brisbane ($1.2 million), Adelaide ($1.007 million), Perth ($1.07 million) and Canberra ($1.03 million).
Even over the past year, values in some parts of the country are still growing strongly, including the south-east of Perth (up by 28.2 per cent), the Logan-Beaudesert area of Brisbane (20.8 per cent) and northern parts of Adelaide (13.3 per cent).
Auction clearance rates have fallen below 50 per cent for the past two months. Burg said this was partly due to sellers over-estimating what buyers were prepared to pay.
“There remains a mismatch between the pricing expectations of buyers and sellers,” he said.
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Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.From our partners
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