Australian home prices have recorded their biggest decline on record falling 8.4 percent, just nine months after the peak of May and surpassing the 2017-2019 recession, CoreLogic said on Monday.

A rapid increase in interest rates as well as higher prices of living have reduced buyers’ capacity to obtain a mortgage. The huge decline, which was recorded on the weekend within CoreLogic’s CoreLogic Daily Home Value Index is expected to be repeated in the next few months, and prices are expected to fall further.

“This was driven foremost, by the most rapid increase in interest rates that we’ve seen in over 30 years,” said Eliza Owen, CoreLogic head of research.

The magnitude and speed of the drop in home prices have surpassed the record set by the recession in 2017 and 2019 in which home prices fell 8.38 percent from peak to trough which lasted over 20 months. During the global financial crisis from 2008 to 2009 home prices fell 7.4 percent from their highest point and fell 6.3 percent during the downturn between 2010 and 2012.

More Flaws To Be Discovered

With more rate hikes anticipated in the coming months, the cost of housing is expected to continue to fall as Ms. Owen said.”I think we’ll witness more declines in the coming months. It’s possible to see the value of housing in the country reaching the level of a double-digit drop,” she said.”Ongoing increases in interest rates will decrease the borrowing capacity and could prolong the nation’s housing recession until interest rates settle.” It is expected that the Reserve Bank of Australia is likely to raise its cash rate from 0.25 percent at its February 7 policy session to 3.35 percent, from 3.1 percent. At the time that the RBA began tightening rates in May, the cash rate was at 0.1 percent.

Analysts predict an additional 0.25 percentage point increase in June before the central bank is able to review the dangers of fixed-lending to those who borrow. The capital cities of the country with the largest population had the most dramatic decline from peak to trough and Sydney home prices fell by 13 percent and advancing than the record 14.9 percent drop that occurred during 2017-2019.

Brisbane’s house prices fell by 10%, which is almost similar to the record-breaking decline recorded during the recession of 2010 and 2012 where home values plummeted by 10.8 percent. Melbourne has lost 8.6 percent since the peak, a bit lower than the record loss of 11.1 percent recorded in the downturn of 2017-2019. In terms of dollars, Sydney home values have decreased by $150,758 since the peak, while Melbourne’s value dropped by $70,243 and Brisbane’s by $78,381.

Adelaide recorded a lower peak-to-trough decrease of 1.6 percent which is equivalent to $10,395. Perth dropped by 0.7 percent, or $3897.

Holding Value

Despite the drastic declines, Sydney dwelling values are still 9.1 percent more than before the outbreak about three years ago when the disease was first discovered after having risen to 27.9 percent during the peak.

The prices of houses in Brisbane are 28.4 percent more than before the pandemic following the huge 43.5 percent increase in the last two years. The slight decrease in Adelaide and Perth home values indicates that the gains from the pandemic from 45.3 percent and 26.2 percent, respectively, were in place.

In contrast, Melbourne’s less increase in pandemics by 17.6 percent and the more dramatic decline of mean value are 1.4 percent higher than two years earlier and likely to drop to levels below that of the pandemic when prices continue to fall.

Nationally In the United States, the 8.4 percent drop is following an increase to 28.9 percent between May 2022 and September 2020 which was the highest rate of growth. The rise in home prices across the nation is the highest in the past, as per CoreLogic. This means that at the end of 2022, homeowners across the nation were sixteen percent higher than five years ago and 59.8 percent more than they were ten years ago.