Higher borrowing costs weigh heavily on property prices


Australia’s property prices fell further throughout the nation in June as higher borrowing costs and rising interest rates weighed heavily on the market.

Nationwide, property prices dropped another 0.25% in June to a new median of $716,000, according to the latest PropTrack Home Price Indicator report.

Prices continued to decline in Sydney (-0.40%) and Melbourne (-0.61%), while prices in Brisbane dropped for the first time since the pandemic began in early 2020.

Price Falls

And monthly price growth has slowed almost everywhere across the country, with widespread falls in June.

Regional areas continue to outperform capital cities, although some regional markets declined throughout the past month.

While prices are down only 0.55% from their peak in March, an outsized interest rate increase by the Reserve Bank of Australia (RBA) in early June and expectations for much higher rates later in the year continue to slow all markets – with widespread falls seen in June, according to the report’s author, REA economist Paul Ryan.


But while the data may be alarming for some, Ryan also adds that this fall follows the third-fastest episode in Australia’s history, with prices up 11.5% in the year to June, and 34% since March 2020 – the start of the pandemic.

“Prices adjusted quickly to the reduction in borrowing costs as the pandemic shocked the economy and interest rates fell to their lowest level on record,” he said.

The two-speed housing market worsens

We’re already seeing that property price growth is slowing in some areas and falling sharply in others.

We’re already aware that Australia is seeing a two-speed housing market.

There are houses, apartments, townhouses, and villa units located in the outer suburbs, middle ring suburbs, inner suburbs, and the CBD.

And they’re all behaving differently.

And the PropTrack data shows that this is continuing, or even worsening.

The biggest slowdowns have been in the most expensive markets of Sydney, Melbourne, and the ACT.

Capital city markets in aggregate fell in the month (-0.35%), the report reveals.

This makes another flat result in regional areas look relatively strong.

Notwithstanding, this represents a sharp slowdown and the slowest monthly result since May 2019 in regional areas.

Regional areas have benefited from relative affordability and preference shifts towards lifestyle locations and larger homes following the pandemic.

Prices have increased 19% in the past year in regional areas, but only 9% in the capitals, the data revealed.



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