Ahhh, the idea of owning a one-bedroom, mouse-plagued house in Sydney for $5,000,000. What a luxury. However, such a property may soon drop down to a halfway reasonable price.
According to the Home Value Index by CoreLogic, the value of Australian homes has dropped by 1.6 percent in August. This national slump is a huge deal, and it’s the largest monthly decline that’s happened since 1983.
As researcher Eliza Owen told the ABC, “It’s just a sign of how extraordinary the increases in interest rates have been, as well as buyers being dissuaded because of higher cost of living and lower consumer sentiment.”
But let’s take a dive into the numbers. Is everywhere in Australia really dropping in price? Well, while we’re not there yet, the price decline we’ve experienced has been rather impressive. Houses were cheaper in every single capital city except Darwin.
Moreover, a similar shift was happening around the rest of Australia, with regional South Australia being the only region to experience house prices going up across the board.
Research director, Tim Lawless, believes that the trend of home prices declining will continue until at least the end of this year. As he stated, “It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve.”
Related: House Prices Are Dropping and Rent Prices Are Rising
Related: Given Interest Rates Hike, Should I Buy a House in Australia Now or Wait?
However, there’s a catch to this situation. While our house prices are going down, the price of financing a mortgage is absurdly high. Back in August, the interest rate went up for a fourth consecutive time.
After this event took place, Finder’s Head of Consumer Research, Graham Cooke, said, “This latest hike could cost the average mortgage holder a whopping $7,300 extra per year compared to what they were paying in April.”
Moreover, Lawless admitted that the interest rate is predicted to bump up another 75 points. He noted, “As borrowing power is eroded by higher interest rates and rising household expenses due to inflation, it’s reasonable to expect a further decline in consumer confidence and lower housing demand.”
“The wash up is that lower housing prices and higher incomes should make home ownership more achievable for non-home owners,” he explained. “But headwinds remain in being able to save for a deposit and demonstrate the ability to service a loan amid such a high cost of living.”
Another great point worth mentioning was made by Owen. As she said that our country’s house prices are only dropping because they were astronomically high to begin with. “It’s also important to remember that this was an extremely large upswing in property values that increased by about 28 percent over the course of two years.”
May we all be able to buy a Sydney house sometime soon.
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