Australia’s biggest property downturn since pandemic threatens economic growth
Australian home prices fell for a fifth month in August in the biggest downturn since the pandemic, and there is further pain ahead as stubborn inflation puts upward pressure on interest rates. Figures from property consultant Cotality released on Tuesday showed national home prices fell 0.9 per cent in August from July, when they dropped 1.2 per cent. Sydney and Melbourne again led the monthly…
Australia's housing market hit its biggest downturn since the pandemic in August, with home prices falling 0.9% month-over-month, according to Cotality. Sydney and Melbourne led the decline, with values dropping 1.4% and 1.1% respectively, leaving prices 7% below their peaks. This downward trend threatens to erode household wealth and curb consumer spending as the economy faces potential slowdown.
The Reserve Bank of Australia (RBA) expects interest rates to remain high, though further cuts are still possible. Economists predict a peak-to-trough home price fall of 10% this cycle, which could be among the worst in Australia. Housing credit growth has slowed, and UBS analysts warn that house prices could fall another 10% in this cycle, presenting a policy dilemma for the central bank.
The slump is affecting major banks and developers, with mortgage applications dropping up to 20% since the budget. Consumer confidence fell to "deeply pessimistic" levels in June, with 60% of household wealth tied up in property.
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