Sydney prices, including May’s result, have already fallen by a total of 1.5 per cent since February, CoreLogic data shows.
Tim Lawless, CoreLogic’s research director, said the speed of the decline has been building momentum since the first month-on-month decline was recorded in February, at 0.10 per cent.
“Through the previous downturn, which commenced in mid-2017, it took the Sydney market 15 months for the monthly rate of decline to reach 1 per cent, so we are seeing a sharper deceleration in market conditions,” he said.
“The market is probably declining more rapidly due to a few factors, including higher levels of housing debt and higher interest rates, so households are likely to be more sensitive to higher mortgage rates and the sharp drop in consumer sentiment from previously high levels.”
During that previous downturn, the sharpest monthly decline was recorded in December 2018, when Sydney prices dropped by 1.8 per cent.
“Prices steadily accelerated to get to that point as there was not any shock moment back then, like with higher interest rates,” Dr Oliver said.
“The tightened lending standards cut off or reduced the supply of credit, so it only affected new borrowers. But now, with higher interest rates, it affects everyone – both new and existing borrowers, so there is more risk. It’s a different ballgame.”
‘Long way down for prices to fall’
Melbourne is also on track to post a deeper price fall of 0.7 per cent during the month, and combined capitals by 0.3 per cent.
While Brisbane will probably post solid growth of 0.8 per cent in May, this is less than half the 1.7 per cent monthly growth recorded in April and way down from last December’s peak of 2.9 per cent.
CoreLogic will release its May home value index on Wednesday.
“The strength in the other cities is no longer enough to hold up the national average, so it seems that nationally prices have turned as well,” Dr Oliver said. “But there’s still a long way down for prices to fall as the Reserve Bank continues to hike rates.
“We’re looking at another rate rise in June and several more by year-end, which would really put a brake on the property market – not because people will default on their loans, but simply because buyers won’t be able to borrow as much.”
Mr Lawless said there were clear signs vendors were struggling to get a sale as buyers pulled back.
“We are seeing evidence that selling conditions have become tougher,” he said.
“Auction clearance rates in the major auction markets of Sydney and Melbourne are now tracking well below average.
“Based on data to the end of April, selling time has increased for private treaty sales and discounting rates are also increasing as vendors find they need to be flexible in their pricing expectations to meet the market.”
Sydney’s clearance rates have been holding below 60 per cent since the first week of March, compared with a decade average of 68 per cent, CoreLogic’s record shows.
In Melbourne, clearance rates have stayed in the low 60 per cent range since the second week of April, lower than the decade average of 62 per cent.
Selling times have ballooned by an extra six days to 27 days in Sydney, and an additional four days to 28 days in Melbourne.
Similarly, discounting rates have increased to 3.3 per cent in Sydney and to 3.4 per cent in Melbourne. Last year, Sydney vendors were discounting by 2.6 per cent on average and by 2.9 per cent in Melbourne.