Australian house prices falling at fastest rate since 1980s as ‘sharp’ downturn widens

Every capital city in Australia except Darwin is now in a housing downturn, according to a new report, with values falling at a trajectory not seen since the 1980s.

CoreLogic's home value index shows national housing values are falling rapidly, after rising about 29% during a period of sharp growth.

Since peaking in April, values are down by 3.5% nationally, CoreLogic's research director Tim Lawless said, which is the fastest decline since the company started tracking property markets in the 1980s.

"We're seeing housing values falling faster now than what we saw during the global financial crisis and also during the early 1990s and early 1980s recessions," he said.

The drop was "sharp", Lawless said, but he believes it may not be prolonged.

"[Whether it is] significant will really depend on how long this lasts and the chances are it probably will be a fairly short but sharp downturn."

National prices fell 1.6% in August, a month in which values dropped in every capital city except Darwin.

Sydney experienced the biggest fall in August with values declining 2.3%, while Brisbane dropped 1.8%, Melbourne dipped 1.2% and Canberra and Hobart both fell 1.7%. Adelaide and Perth had smaller falls of 0.1% and 0.2% respectively.

The same trend is occurring in most regional areas, with only regional South Australia recording an increase in dwelling values in August.

This follows a period of soaring prices in regional areas during the pandemic as people opted for a "tree change".

"A lot of these areas that had such momentum may have overshot the mark a little bit," Lawless said.

"It's not uncommon to see markets that have seen a really high growth rate also record a larger than average downturn as well."

Over the past 30 years, Australia has witnessed six distinct cycles of growth and decline in housing values, with the long-term trend undeniably upwards. Nationally, dwelling values have increased 382% over the past three decades.

But falling property prices in capital cities in recent months have reduced the time needed to save for a deposit for the first time in two years, according to a new housing affordability report.

Still, due to the rising cost of living, many buyers are finding it harder to put money aside.

"Renters in particular are facing persistent challenges in attaining affordable and secure housing as rents increased by 9.8% nationally over the past year, the fastest rate on record," CoreLogic's head of Australian research Eliza Owen said.

In June, the portion of income required to service a new mortgage nationally increased to 44%, the highest level since 2011.

Lawless said the household income to housing values ratio needed to improve, especially in Sydney and Melbourne, for housing to reach a point it could be deemed affordable.

In Sydney and Melbourne "the dwelling value income ratio is up above 10 times, meaning the typical household is spending more than 10 times the gross annual household income to buy a medium-priced dwelling," he said.