Australia’s property prices fell further again throughout the nation in July as higher borrowing costs and fast-rising interest rates drive down demand.

Across the country, property prices dropped another 0.43% in June to a new $751,000 median, and are now 1.66% below their peak, according to the latest PropTrack Home Price Indicator report.

Prices continued to decline in Sydney (-0.70%) and Melbourne (-0.59%) with both markets now down over 3% from their peaks.

Falling Price

But prices in Adelaide (the only market to have avoided price falls so far in 2022) and Perth bucked the trend to be the only capital cities to see property price increases in July, although this is expected to be temporary with price falls likely in the months ahead.

And the price falls now extend to regional areas, with prices in all eastern states’ regional markets declining.

Combined regional areas fell 0.18% in July and are 0.5% below the price peak set in April 2022.

Despite recent price falls, regional areas remain up almost 50% since the start of the pandemic: Capital cities are up almost 30%.

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Significant interest rate increases by the Reserve Bank of Australia (RBA) have pushed rates up by 1.25 basis points since May, with further increases widely expected in early August and beyond.

“We expect these borrowing cost increases to continue to drive home prices lower over the second half of 2022 and throughout 2023,” REA economist and the report’s author, Paul Ryan said.

But these price falls follow significant increases over the past two years – regional areas are still up almost 50% since the start of the pandemic, with capital cities up almost 30%.

Regional markets take a hit, especially in our eastern states

PropTrack’s data shows that regional markets have outperformed capital cities, with prices up 16.5% over the past year, relative to 5.7% in the capitals.

That’s because these areas have benefited from relative affordability and preference shifts towards lifestyle locations and larger homes following the pandemic.

But it seems even these areas aren’t immune from the declining market – price decreases have now extended widely across regional markets, which are now down 0.5% from their peak, with all eastern seaboard regional areas seeing falls in July.

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Sydney and Melbourne are now down 3% from their peak

National annual growth in our national property markets is 8.5% in the year to July 2022.

Capital cities are up 5.7% over the same period whereas prices in regional markets are 16.5% higher than last July.

It comes as no surprise that Australia’s most expensive property markets – Sydney, Melbourne, and the ACT – are leading the price falls.

Prices have fallen more than 3% from their peak in Sydney and Melbourne.

In Sydney, prices are now only up 2.5% over the past year, while Melbourne is up 2.4% over the same period.

This is likely because larger mortgages in these regions may mean higher interest rates, and uncertainty about how much higher they will rise, is impacting these regions the most, Ryan explains.

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