House prices in Australia fell by 5.3 percent over 2022, new data shows.

In its latest report, real-estate information services firm CoreLogic says that dwelling values across Australia contracted by 1.1 percent over the month of December as the pace of house price declines accelerated following a previous moderation across September to November.

As a result, national median home values recorded an overall drop of 5.3 percent across the whole of 2022 to finish the year at $708,613. This represents the biggest annual decline since the onset of the Global Financial Crisis in 2008.

According to the data, across 2022:

• Capital cities led the decline, recording median price declines of 6.9 percent for the year. Despite falling in the December quarter, values in regional areas finished the year at similar levels to those seen at the beginning of the year.
• Declines were concentrated in Sydney and Melbourne, with values in Adelaide bucking the national trend and rising by 10.1 percent.
• The upper quartile of the housing market led the downturn, with most capital city and broad ‘rest-of-state’ regions recording weaker performance across the upper quartile relative to the lower quartile and the broad middle of the market.

Despite the downturn, median dwelling values remain above pre-COVID levels (March 2020) to the tune of 11.7 percent in combined capital cities and 32.2 percent in combined regional areas.

The latest data comes as demand for housing across Australia has been impacted by a run of eight consecutive monthly interest rate increases, which has seen official interest rates rise from 0.10 percent in April to 3.1 percent at the end of the year amid a surge in inflation (6.9 percent over the year to October) which followed the outbreak of the Ukraine war.

CoreLogic’ research director, Tim Lawless described 2022 as a year of contrasts, with housing values mostly rising through the first four months of the year but falling sharply as the RBA commenced its rate tightening cycle.

“Our daily index series saw national home values peak on May 7, shortly after the cash rate moved off emergency lows,” Lawless said.

“Since then, CoreLogic’s national index has fallen 8.2 percent, following a dramatic 28.9 percent rise in values through the upswing.”

Going forward, CoreLogic expects 2023 to be a year of more contrast, with further declines in home values through early months followed by a stabilisation after interest rates peak.

At least in the initial term, it says that housing risks remain skewed to the downside.

All up, CoreLogic says several factors could influence the housing market in 2023.

In particular:

• Any further increase in mortgage rates beyond the almost certain lift of at least one more 0.25 basis point increase would exacerbate risks associated with mortgage stress and a precipitate a lift in distressed sales.
• A surge in fixed loan refinancing is likely as two-thirds of fixed loans are set to expire in 2023. This will leave borrowers needing to refinance as variable mortgage rates that will be 3-4 percent higher compared with their original rate and could lead to an upward trend in mortgage arrears from record lows in 2022.
• An increase in the number of newly listed properties could materialise following an abnormally low listing flow in 2022 as prospective vendors held back on selling amid deteriorating market conditions. Should this occur without any commensurate improvement in buyer activity (as is likely), further downward pressure on prices is likely as properties spend more time on the market and vendor discounting becomes more aggressive.
• Whilst housing values are likely to stabilise once interest rates peak, any broad-based recovery in house prices will depend upon either rates coming down or other forms of stimulus.
• Rental markets are likely to remain tight as a return to normal immigration levels coincides with persistently low rental vacancy rates.

Enjoying Sourceable articles? Subscribe for Free and receive daily updates of all articles which are published on our site

Want to grow your sales, reach more new clients and expand your client base across Australia’s design and construction sector? 

Advertise on Sourceable and have your business seen by the thousands of architects, engineers, builders/construction contractors, subcontractors/trade contractors, property developers and building industry suppliers who read our stories across the civil, commercial and residential construction sector