ABC News Daily
Why house prices are starting to fall
Nov 3, 2024
Ian Verrender, ABC’s Chief Business Correspondent, offers insights into the shifting dynamics of Australia's housing market. He highlights the impact of interest rate hikes since May 2022, leading to slight price drops in Sydney and Melbourne. Despite this, many prices remain near record levels. Verrender discusses how population growth affects demand and the affordability crisis faced by buyers. He warns that future interest rate cuts could spark renewed demand, possibly driving prices up again, making the housing landscape a complex one.
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Quick takeaways
- Despite recent marginal declines in house prices, affordability remains a significant issue due to rising living costs and stagnant wages.
- The Australian housing market's ongoing demand, driven by population growth, is likely to counteract any temporary price drops, sustaining high market levels.
Deep dives
The Impact of Interest Rates on Housing Affordability
Thirteen consecutive interest rate hikes have negatively influenced housing affordability in Australia, making it the worst it's been historically. Despite the expectation for housing prices to drop significantly due to these hikes, the declines have only been marginal, particularly in major cities like Melbourne and Sydney. This situation is exacerbated by rising costs of living, which have eroded disposable income, meaning that potential buyers are finding it increasingly difficult to enter the housing market. Consequently, even with some small reductions in house prices, the overall market remains challenging for first-time homebuyers.
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