rate rises hurt house prices

Rate rises hurt house prices: analyst
Friday Mar 14 17:27 AEDT
Home prices have taken a dive because of higher interest rates with just over one third of residential properties in Sydney and Melbourne having lost value as have half of all homes in Perth.

However, this represents a buying opportunity for canny, cashed up investors, says property analyst Residex Pty Ltd.

Residex found that all major cities, except Adelaide, recorded a fall in median house values in February.

The Reserve Bank of Australia raised official cash rates last month and again earlier this month to a near 12-year high, further tightening monetary policy in an effort to rein in inflation.

Hobart home prices fell by 2.2 per cent, Sydney by 1.5 per cent, Brisbane by 1.2 per cent, Melbourne by 1.0 per cent, Perth by 0.9 per cent and Darwin by 0.8 per cent.

Bucking the trend, median prices in Adelaide rose by 1.35 per cent and Canberra was flat.

The data also showed most cities recorded an increase in the percentage of homes whose value declined in February.

Some 34 per cent of Sydney homes declined in value, Melbourne 35 per cent and Perth 55 per cent.

Apartment prices seemed to have fared a little better. The Residex data showed median prices for units fell in the key cities of Sydney (-0.7 per cent) and Melbourne (-0.3 per cent) and growth elsewhere was clearly slowing.

Residex managing director John Edwards said any dip in property markets caused by higher interest rates created an upside for investors who were now able to buy more cheaply.

"Whereas the impact of rate increases was being felt previously in the less desirable areas of our most expensive cities, the evidence is now in that property markets have stalled generally," Mr Edwards said.

Mr Edwards said the long-term demand for housing would remain strong, while housing stock was still relatively limited.

"For investors with cash at hand this translates to a rare buying opportunity, with long-term returns underpinned by above-average rental flows", he said.

The Residex data showed there were definite signs of a stalling housing market over the last few months except in Brisbane.

Data for the three months to the end of February showed slight declines over the quarter in median house values in Sydney (-1.2 per cent) and Perth (-0.1 per cent) and flat conditions in Melbourne (+0.1 per cent). Brisbane prices rose by 3.4 per cent.

Mr Edwards said he expected the combination of mortgage stress and, increasingly, margin calls on falling share market holdings would lead to an increase in forced and default property sales.

"Unfortunately, forced sales are where the real opportunities lie for investors, he said.

"We are advising our clients to look closely in middle to outer-middle ring areas of major cities, where forced sales were likely to occur," he said.