Australia's property market is experiencing its sharpest slowdown since the pandemic, Reuters reported, with falling prices, weaker buyer demand, and a steep drop in loan inquiries now flowing through to the broader economy.
Home values in Sydney and Melbourne have fallen almost 5% this year, reversing a mood of near-permanent price growth that had made Australian property among the most expensive in the world.
Credit analytics firm Equifax recorded a 14% year-on-year fall in mortgage inquiries in June, a sharp turnaround from growth of nearly 11% in January. Auction clearance rates have also softened, and new listings are falling even as total housing stock builds, a sign properties are sitting on the market for longer.
The Reserve Bank of Australia lifted rates three times between February and May to contain inflation linked to the conflict in the Middle East, unwinding rate cuts made the previous year that had helped drive prices to record highs.
RBA Governor Michele Bullock said the housing market is "a bit of litmus test" for whether financial conditions are tight enough to bring inflation down, adding the board would face "difficult decisions" if inflation failed to ease. She also acknowledged the housing market had slowed more than the RBA expected.
Brokers won't have long to wait for the next signal. The RBA's next cash rate decision falls on 11 August, with industry predictions divided between another hold and rising expectations of eventual cuts.
The pullback has hit first-home buyers and investors differently.
Sydney mortgage broker Liza Cheong said "a lot of first-home buyers are hesitant to commit to a long-term liability" despite softer prices and more accommodative government settings, while investors eyeing negative gearing have also stepped back.
"Investors who wanted to negative gear just withdrew from their plans," Cheong said, adding client sentiment has shifted noticeably.
The pace of decline is accelerating. Cotality's June Home Value Index recorded a 0.4% monthly fall, the steepest since December 2022, with capital city values down 1.3% over the June quarter alone, led by Sydney (−3.2%) and Melbourne (−2.6%).
Government changes curbing negative gearing on established homes and scrapping an investor tax discount have added further pressure on demand, alongside the higher rate environment.
The slowdown is spilling into other sectors. Bank share prices have fallen 12% since February, erasing more than $60 billion in market value, as mortgage lending — a core profit driver for major lenders — comes under pressure. Retailers are also feeling the effects, with Myer shares dropping 10% after the company flagged softer spending linked to the weaker housing market.
Sebastian Watkins, chief executive of Lendi Group, said the market would eventually stabilise but the timeline remains unclear. "Is it six months? Is it 12 months? It's really hard to say," he said.
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