Australian home values fell 1.3% in July, as Brisbane, Canberra and Hobart joined Sydney and Melbourne in recording month-on-month declines, according to CoreLogic.

National housing values fell for third consecutive month in July, after declining 0.6% in June and falling 0.1% in May.

After national dwelling values surged 28.6% through the pandemic growth phase, values are now 2% below April’s peak.

In July, Sydney home values fell 2.2% and Melbourne values declined 1.5%.

Home values in Brisbane, Canberra and Hobart decreased 0.8%, 1.1% and 1.5%, respectively, in July.

Perth, Adelaide and Darwin values edged higher, up 0.2%, 0.4% and 0.5% in July.

Source: CoreLogic

CoreLogic’s Research Director Tim Lawless said housing market conditions were likely to worsen as interest rates surged higher through the remainder of the year.

“The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5,” Lawless said.

“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s.

“In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years.

“Due to record high levels of debt, indebted households are more sensitive to higher interest rates, as well as the additional downside impact from very high inflation on balance sheets and sentiment.”

Regional market home values decline

Regional markets also weakened in July, with the combined regionals index down 0.8% in its first decline since August 2020.

“Dwelling values across CoreLogic’s combined regionals index were up 41.1% from the pandemic trough to the June peak, compared with a 25.5% rise across the combined capitals index,” Lawless said.

“The stronger growth reflects a significant demographic shift towards commutable regional markets, which is likely to have some permanency as more workers take advantage of formalised hybrid employment arrangements.”

Unit values dip in July

Unit values across the combined capitals recorded smaller falls generally compared to house values, down -1% and -1.5% in July respectively.

“This trend is most apparent across the three largest capitals as well as Canberra, where housing affordability challenges may be deflecting more demand towards the medium to high density sector,” Lawless said.

“Additionally, firmer interest from investors should favour the unit market over houses where demand has historically been more concentrated.”