Australian House Prices Falling at Fastest Pace in Over 40 Years

Australia's residential house price downturn accelerated to its fastest pace in over forty years in October, with economists predicting more weakness in coming months as interest rates continue to rise.

Property research group Cotality said its national home value index fell 1.2% in October, taking the downturn into a seventh consecutive month.

The national index is now 6.7% below its March peak, equivalent to a decline of approximately 63,400 Australian dollars in the value of the median Australian dwelling, it added.

Cotality's combined capitals index is now down 8.1% in seven months.

House prices have been falling rapidly since earlier in the year when the federal government announced tax increases on property investors and the Reserve Bank of Australia started raising interest rates to combat stubborn inflation pressures.

The RBA is expected to deliver a fifth interest rate rise at a policy meeting next week, cementing the official cash rate at its highest level in 15 years. Economists do not rule out the prospect of even more increases in coming months.

"An array of headwinds continued to weigh on housing demand, even amid a shortage of new homes being built," said Cotality's research director, Tim Lawless.

Affordability and serviceability constraints were the earliest factors weighing on housing demand, with these headwinds amplified by four interest rate hikes, persistently low confidence and ongoing cost-of-living pressures, he added.

Brisbane and Perth have overtaken Sydney with the fastest pace of decline, with dwelling values down 2.0% and 1.7% respectively in October from September, the data showed. Sydney is a close third, with values down 1.6% over the month.

The mid-sized capitals, where home values recorded extreme growth conditions over the past six years, are now well and truly in a correction, Lawless said.

Despite the pace of the retreat, most home buyers will still retain large equity buffers given the pace of gains in prior years, he added. For example, a 20% drop in Perth home values from their record high would only take the market back to levels recorded in around mid-2025.

The number of home sales has dropped sharply as demand has weakened. Modelled estimates put the number of home sales over the past three months at 23% lower than a year ago and 18% below the previous five-year average, the report showed.

The decline in sales activity has been most significant across Sydney and Brisbane, down 30% and 29% respectively compared with a year ago.