Home prices across the country fell for the first time since the start of the pandemic just as homeowners saw the first Reserve Bank cash rate rise in over a decade.
The latest PropTrack Home Price Index, showed that property values across Australia fell 0.11 per cent in May, led by further declines in Sydney (-0.29 per cent) and Melbourne (-0.27 per cent).
Prices were also down in the ACT (-0.12 per cent) for the first time in three years, while Hobart (-0.05 per cent) also saw a small decline.
Adelaide (0.58 per cent) and Brisbane (0.35 per cent) were the strongest performing capitals over the month, with both markets bucking the trend and delivering continued growth in 2022.
Over the past year, growth standouts among the capitals have been Brisbane and Adelaide, while regional counterparts in Queensland, New South Wales and Tasmania have led growth outside the capitals.
REA Economist Paul Ryan said conditions have now shifted rapidly from 2021.
“Home price growth has slowed considerably in 2022 and is now falling nationally,” Mr Ryan said.
“This was the first national price fall since the start of the pandemic and follows the first interest rate rise in early May.
Mr Ryan said Sydney and Melbourne have been leading the price declines.
“A clear two-speed housing market has emerged,” he said.
“Affordable, lifestyle regions of Brisbane, Adelaide, regional NSW and Tasmania continue to see solid growth, with flat or falling prices elsewhere.”
While housing market activity in May was disrupted by the federal Election, price growth has been slowing for some time, according to Mr Ryan.
“Annual price growth has fallen from 24 per cent only six months ago to 14 per cent now,” he said.
“This follows expectations of sharply higher interest rates in 2022, which will erode the affordability of existing prices.
“The speed of official interest rate hikes and wages growth remain the key unknowns for price growth moving forward.”
Sydney home price growth fell in May for the second consecutive month, according to Mr Ryan.
Price momentum in Sydney has slowed dramatically since mid-2021, with annual price growth now at the slowest rate since January 2021, partly due to stretched affordability.
Home prices in Melbourne fell in May, which was a continuation of moderating conditions in 2022, Mr Ryan said.
Price growth has slowed considerably since mid-2021. Prices are now up only 7.5 per cent over the past year, the slowest capital city market. Melbourne’s median house value is now just above $900,000.
The Brisbane market has continued its solid growth throughout 2022, albeit at a slower pace than was seen in 2021, Mr Ryan said.
Brisbane prices have still increased by 26 per cent over the past year, the strongest of all housing markets across the country. Brisbane looks set to continue to see strong conditions over the coming period.
Adelaide continues to see strong growth, with prices up a further 0.6 per cent in May, according to Mr Ryan.
Prices increased by 24 per cent over the past year in Adelaide, the second strongest capital city market after Brisbane. Adelaide continues to have the most momentum of any city market.
The Perth market continued to grow slowly in May, but has remained relatively subdued over the past year, with prices growing just over 8 per cent.
Unit prices have continued to fall across the city.
Price growth continues to slow in Hobart, with a flat result in May following falls in April.
Despite this, prices have grown strongly over the past year relative to the rest of the country, up 19 per cent.
Darwin prices continued to increase at a slow pace in May, Mr Ryan said. Conditions appear to be stabilising in Darwin after rapid slowing in late 2021.
Nevertheless, prices are up by less than 9 per cent in the city over the past year.
Prices fell in May, for the first time in three years, according to Mr Ryan.
Price growth has slowed rapidly in the ACT, following a flat result last month. Despite this, price growth in the ACT has been among the strongest capital city regions over the past year.
However, with price levels above all capital cities apart from Sydney, stretched affordability may weigh on price growth over the coming period.