Steep value declines categorise 2022’s end: Report

During the period, combined capital city prices slid by 0.22 per cent, with every market bar Darwin and Hobart posting a drop. 

The two cities with the highest monthly declines were Canberra (down 0.43 per cent) and Melbourne (down 0.34 per cent).

Adelaide, which has bucked the downturn that swept the country’s property market in the last six months, also succumbed to the malaise. In December, the city of churches recorded its first notable price drop, with values in the South Australian capital falling by 0.18 per cent. 

Despite the December drop, home prices in Adelaide remain 9.63 per cent higher compared to 12 months ago — the highest level of annual growth seen in any capital city.

Darwin emerged as the strongest-performing city during the period, notching price growth of 0.32 per cent, while Hobart also saw values edge up 0.11 per cent. Despite the monthly lift, prices in both markets continue to be below the peak levels recorded earlier in 2022. 

Regional areas outperformed their capital city counterparts in December, posting a more subdued 0.17 per cent monthly decline. 

Declines hit hardest in regional Queensland, where values fell by 0.33 per cent. Meanwhile, regional Western Australia, Northern Territory, and South Australia defied the national downward trend to reach new peaks.

With a 2.08 per cent annual increase, regional locations once more bested their capital counterparts, which posted a 4 per cent year-on-year decline. On the other hand, capital cities posted a 4 per year-on-year decline. 

Sydney — which led the capital city pack during the pandemic boom — is now the biggest annual decliner among its peers, with property values in the NSW capital now 7.23 per cent lower than 12 months ago. The harbour city was closely followed by Melbourne (-5.96 per cent) and Canberra (-5.05 per cent).

Overall, home prices across the country are now down 2.29 per cent compared to the same period last year and 4.25 per cent below their peak. 

Further analysis of the data revealed houses have also recorded deeper declines in comparison to units. Nationally, unit prices have dipped 1.72 per cent over the past 12 months, while house prices are down 2.4 per cent during the same period. 

Despite recent falls, national home prices remain 29 per cent higher than their pre-pandemic levels.

PropTrack economist Anne Flaherty said rising interest rates were the primary driver of price declines in 2022.

“Interest rates increased for the eighth consecutive month in December, placing further strain on borrowers,” she said.

The expert noted that the borrowing power of an average buyer had been reduced by almost 25 per cent due to the cumulative impact of these rate increases.

On the upside, she highlighted that the rate of decline has slowed in recent months. In part, this is likely due to a reduction in the magnitude of the interest rate rises seen since October.

But with the Reserve Bank of Australia retaining its hawkish stance during the tail end of 2022, Ms Flaherty forecasts that the downturn will continue to play out this year. 

“While interest rates are likely to be approaching their peak, the Reserve Bank has signalled the potential for more increases in 2023 — higher interest rates would further erode borrowing capacities and drive prices lower,” she concluded.