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The Property Market Is Falling-Here's What You Need To Know

During the peak of the pandemic in Australia, property prices were at a record high. Now economists predict that the market will fall "fast and sharp" over the coming months as inflation impacts the cost of living. What does this mean for first home buyers and sellers? We provide a comprehensive analysis for the market's trajectory.

Cash Rate Hikes Causing Market To Fall

The housing market hit its peak during the pandemic when prices jumped 28.6% on average from mid-2020 to April 2022. Regional Australia was almost double metropolitan suburbs with prices lifting up 41.1% on average as employees were working from home.

The Reserve Bank of Australia (RBA) increased the cash rate from 1.35% to 1.85%, which is the fourth month in a row since May that the RBA has hiked the cash rate caused by inflation. Analysts predict future cash rate rises as early as this September with no financial reprieve in sight. The cash rate rise has scared potential home buyers as mortgage repayments are drastically eating into the cost of living budget.

Biggest Fall Since Global Financial Crisis

Analysts say that house prices in Australia are falling at their fastest rate since the global financial crisis, with market conditions expected to worsen as inflation takes its toll on mortgage and cost of living expenses. Borrowers are feeling the impact as the big four banks have passed on each rate hike in full. During the global financial crisis, Australia's medium property price fell by approximately 8.5% in just 11 months.

How Much Is The Market Falling?

It is predicted that Australian property prices on average will dive anywhere from 10 to 20% from the peak of the housing market boom. Before the end of the year, it is expected that the national market will drop another 2% to 5% and same again by the end of 2023. Despite house prices falling, it doesn't mean that housing affordability will be any more achievable for most people. Rather, prices are expected to drop to the equivalent of April 2021 prices, and may not be around for a long time before the market changes again.

Final Thoughts

The market has seen astronomical shifts in the last few years and this period is no exception. House prices may be falling sharply and fast but that still does not offer enough hope for potential buyers looking to enter the market. With the inflation expected to grow and the RBA hiking the cash rate even further, there are tough times predicted for banks, home buyers and sellers.

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Sally Writes 04 Oct 2022