Australia home prices post steepest drop in almost four decades

SYDNEY – Australian home prices recorded their largest monthly decline in almost four decades in August, with rising interest rates expected to drive further falls this year and next.

Sydney, Australia’s largest market, slid 2.3 per cent, Melbourne dropped 1.2 per cent and Brisbane fell 1.8 per cent, property consultancy CoreLogic said in a report on Thursday. They were the main drivers behind a 1.6 per cent decline in major cities.

The national index, which includes regional markets, also dropped 1.6 per cent in its worst monthly result since 1983.

The Reserve Bank of Australia (RBA) began an earlier-than-expected tightening cycle in May and has since hiked by a total of 175 basis points to take the cash rate to 1.85 per cent. It is widely expected to raise again next week, with money markets implying a rate of 3.2 per cent by December.

“It is hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” said CoreLogic research director Tim Lawless.

RBA officials have signalled confidence in mortgage holders’ ability to absorb rising borrowing costs, saying households are in a “fairly good position” to cope with them.

Mr Lawless expects the RBA’s cash rate to rise by at least another 75 basis points from current levels, while adding that more housing stock is likely to come onto the market during the spring selling season.

This will add “further downwards pressure on housing values”, he said. BLOOMBERG