Property values in Sydney have fallen by six figures since the beginning of the year, and additional interest rate increases are anticipated.
According to CoreLogic statistics, the price of a house or apartment in the most expensive city in Australia has decreased by $116,500, or 10.1 percent, since February.
The high came three months ahead of the Reserve Bank of Australia’s first rate rise since 2010—a 0.1% record low increase—in May.
Tim Lawless, director of research at CoreLogic, said that Sydney property values had been declining prior to rate rises and that borrowers had previously seen six straight months of rate increases.
‘Although Sydney’s property prices were already falling when the cycle of rate hikes started, the speed of decrease dramatically increased after the first interest rate rise in May,’ he added.
Early in 2022, when banks ceased providing loans with 2% fixed rates, the decline was under way.
Sydney’s median home price, which includes both homes and apartments, was $1,053,131 at the end of September, down 8.4% from the year’s beginning.
However, the most recent CoreLogic data, covering October, reveals additional price declines.
According to fresh papers acquired by The Australian under the request of information act, the Reserve Bank now anticipates a 20% decline in the price of homes in major cities in 2022 and 2023.
This scenario is far worse than RBA Governor Philip Lowe’s prediction of a 10% decline by 2023, which he outlined during a parliamentary hearing last month.
From its low point in October 2020, just before the RBA cut interest rates to a record low, to its high on February 13 of this year, Sydney’s real estate market increased by 27.9%.
For values to return to their pre-Covid levels, a further decline of 11.4% is required.
Sydney property prices still need to increase before they cancel out the capital gains accumulated during the most recent expansion cycle, according to Mr. Lawless.
Mid-point home prices in the city were $1,283,502 in September, a 9.2% decline from the year’s beginning.
In the three months leading up to September, prices had decreased 7%.
In contrast, Melbourne’s median home price, which was $937,131 in 2017, has decreased by 6.2% this year.
Only Darwin’s capital city housing market had no monthly decline in prices in September.
Although Adelaide’s home prices dropped last month by 0.3% to $704,692, they are still up 11.1% year to date.
In September, Brisbane home prices dropped 2% to $841,923, although they are still up 3.7% so far in 2022.
On Melbourne Cup Day, all four of Australia’s Big Four banks anticipate raising interest rates once again; this will be the seventh consecutive monthly hike.
Due to the most severe monetary policy tightening since 1994, the cash rate increased by 0.25 percentage points in October to a nine-year high of 2.6%.
On November 1, the four major banks—the Commonwealth Bank, Westpac, NAB, and ANZ—expect the rate to rise by another quarter of a percentage point, bringing it to 2.85 percent.
The rate would rise for the eighth time in a row, which is the most times since the RBA started announcing its target cash rate in 1990.
Borrowers with an average $600,000 mortgage would be need to come up with an additional $90 per month for their monthly repayments even with a lower quarter percentage point rate hike.
If the RBA cash rate were to increase by 25 basis points, this borrower’s repayments would go from $2,546 to $3,145.
The base variable lending rate at Commonwealth Bank would rise from 4.54 to 4.79 percent, with banks likely passing on the whole Reserve Bank hike.
Additionally, since early May, when RBA interest rates were still at a record-low of 0.1%, there would have been a $315 rise in average monthly repayments.
The RBA’s goal range of 2 to 3 percent was more than doubled in August, rising to 6.8%, which is close to the highest levels in 32 years.
The rise in November is anticipated by CBA to be the last one for this tightening cycle.
However, ANZ predicts it will arrive by May and Westpac anticipates a 3.6% cash rate by March.
By December, NAB wants to have a cash rate of 3.1%.