Wayne Cole

SYDNEY (Reuters] – Australian home values lost their winning streak of 20 months in May due to falling prices in Sydney, Melbourne and other factors such as rising interest rates and a tightening cost-of living.

CoreLogic, an international property consultancy released figures on Wednesday showing prices fell 0.1% nationally in May. However, this was offset by 0.3% falls in major capital cities. The 14.1% annual growth rate was stable despite a slowdown in the pace of inflation, which is a reflection on the incredible gains over 2021.

The May value drop in Sydney was 1.0%, and Melbourne’s dropped 0.7%. Although prices in Sydney are now down 1.5% from January’s peak, they remain up 23% over pre-pandemic levels.

Other cities did better, with Brisbane increasing 0.8% in May and Adelaide rising 1.8%. Perth rose 0.6%.

These regions continue to enjoy the benefits of a move to rural living and more space. Prices rose 0.5% in May, to 22.1% above a year earlier.

The Reserve Bank of Australia (RBA) moved to increase interest rates early in May. This was the first rise in eleven years.

CoreLogic’s research director Tim Lawless said that “Housing is becoming more difficult to afford, households have become more sensitive to higher interest rate as debt levels have increased, savings reduced, and lending conditions have tightened,”.

Now we also see high inflation. This is causing less demand for housing.

With listings increasing at an above-average level in Sydney, Melbourne and other cities, buyers were turning to supply. Clearance rates at auctions also have declined steadily.

The demand was also down, with Sydney’s home sales falling 33% from last year and Melbourne dropping 21% in three months to may.

A steady drop in the prices will have a negative impact on consumers wealth. The notional value for Australia’s 10,8 million properties is A$9.9 trillion (or $7.11 trillion).

($1 = 1.3924 Australian dollars)