© Reuters. Reuters/Jason Reed
by Wayne Cole
SYDNEY (Reuters) – Australian house prices broke a 20-month winning streak in May as declines accelerated in Sydney and Melbourne amid rising interest rates and a cost-of-living crunch.
Figures released by real estate advisor CoreLogic on Wednesday showed prices fell 0.1% nationwide in May, weighed down by a 0.3% decline in major capitals. Although annual growth slowed, it held steady at 14.1%, reflecting huge gains made during 2021.
Shares in Sydney fell a whopping 1.0% in May while shares in Melbourne fell 0.7%. Prices in Sydney are down 1.5% from their January peak but still 23% above pre-pandemic levels.
Most other cities did better, with Brisbane up 0.8% in May, Adelaide up 1.8% and Perth up 0.6%.
Regions continued to benefit from the shift toward rural life and more space, and prices rose 0.5% in May to 22.1% higher than they were a year ago.
Weakness in high-priced markets in Sydney and Melbourne was partly reflected in the RBA’s move to raise interest rates in early May, the first increase in 11 years.
“Housing is becoming prohibitively expensive, and households are becoming increasingly sensitive to higher interest rates as debt mounts, savings shrink and credit conditions tighten,” said Tim Lawless, director of research at CoreLogic.
“Now we are also seeing rising inflation and higher debt costs which is lowering demand for housing.”
Supply turned to buyers, as listings in Sydney and Melbourne rose to above-average levels while clearance rates at auctions steadily declined.
Demand also faltered, with home sales in Sydney down 33% in the three months to May compared to the same period last year, while home sales in Melbourne were down 21%.
Continued lower prices will affect consumer wealth with the face value of the $10.8 million Australian homes estimated at A$9.9 trillion (US$7.11 trillion).
(1 dollar = 1.3924 Australian dollars)