Sydney’s house value fall led the country, down 7.6 per cent between May and September, while Melbourne’s fell 4.9 per cent over the same period. Brisbane, where values were still rising as other capitals began to fall, is now showing a sharp fall in values, down 2.9 per cent over the past two months.
Although home values have been falling since the beginning of the year, the rate of growth had slowed since last year, Lawless said, when fixed interest rates began to rise and the ‘Australian Prudential and Regulatory Authority reduced the maximum amount that buyers could borrow.
Home values fell almost immediately after interest rates rose. Credit: Peter Rae
Wheatley Finance owner and mortgage broker Andrew Wheatley said demands to refinance or renegotiate loans had become more desperate from customers in recent months.
Although many had reached out before the rate hike to try and get a better deal, the messages I was getting were increasingly urgent.
“There are a lot of people who have just reached out saying ‘my mortgage payments are getting out of control and I need to talk to someone,'” Wheatley said.
“What I have [also] what we’ve seen in the last three to four months is that people are not in a hurry and they’re getting close to properties quickly,” he said. “Before they had to rush out and buy because the longer they took, the higher the prices would go . Waiting six months could cost a buyer an extra $50,000.”
Buyer advocate Cate Bakos said buyers had been anxious about rising interest rates since they started in May, as many realized they qualified to borrow less from banks and feared stretching – too much financially.
“Fear has been heightened by interest rate hikes, especially for people who haven’t experienced them before,” Bakos said. “A lot of nervous buyers are applying their own caution and their own shock absorbers, they’re saying ‘the bank said I can borrow $1.6 million, but I don’t want to go over $1.3 million.’
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Commonwealth Bank Australian chief economist Gareth Aird said more property price falls could be expected as interest rates continue to rise.
“Home prices will continue to fall until rates stop rising,” Aird said.
Loan values have also had an impact. Australian Bureau of Statistics data for July revealed loans for residential property had fallen 8.5 per cent, following a 4.4 per cent drop in June, he said.
Aird has predicted that prices across the country will fall by 15 per cent from peak to trough during the recession, while other banks, including ANZ, forecast prices to fall by 18 per cent.
“That’s conditional on rates going up another 50 basis points, so 25 basis points in October and 25 in November,” Aird said. “If it rises further, it could change predictions – nobody knows how far they will take the cash rate, including the RBA itself, that will determine how far house prices will fall.”