Property: Australian home prices suffer biggest monthly fall since December 2022

Anthony Albanese has hailed the biggest monthly drop in home prices in almost four years as good for first-home buyers amid fears Australia is bracing for one of the worst housing market downturns in more than four decades.

The Prime Minister, who co-owns an investment property on the NSW Central Coast north of Sydney with his new wife, Jodie Haydon, said a slowdown would mean less competition from investors, following Labor’s May Budget changes to negative gearing and capital gains tax concessions.

“The great news is that this Saturday, like last Saturday, first home buyers would have rocked up to auctions and not be competing with investors who want to negatively gear their property and have taxpayers backing in those investments. So, a level playing field,” he told ABC News Breakfast on Wednesday.

“There will be an increase in the value of homes, but it will be slightly lower.”

But since March, after the Reserve Bank raised interest rates for the second time this year, combined capital city house prices have already plunged by 1.3 per cent, led by Sydney and Melbourne, new Cotality data for June showed.

Cotality, Australia’s leading real estate data group, is warning of an 8 per cent peak-to-trough plunge in Australian home values by the middle of next year, which would mark one of just three sustained downturns since the early 1980s.

This has called into question Treasury modelling suggesting a 2 per cent slowdown in property values over several years as a result of Labor’s tax changes.

In a clash on Seven’s Sunrise program, Liberal frontbencher Michaelia Cash accused Labor Housing Minister Clare O’Neil of causing a downturn that would ultimately hurt renters as investors pulled out of the market.

“The big picture is you’re crashing the market,” Senator Cash said.

“You’ve got to start living in the real world and take responsibility for the real-world impact of your policies.

“You have hurt first homebuyers, you have hurt renters, but worse than that, you have stalled confidence in the market.”

A sustained fall could see house prices suffer an 8 per cent decline from this year’s peak, which would be comparable to the downturns of 2017 to 2019, sparked by a banking regulator crackdown on interest-only loans, and 1982 and 1983 during a prolonged recession, Cotality Australia’s head of research Gerard Burg said.

“There’s no reason it couldn’t,” he told The Nightly. “An 8 per cent (downturn) is not out of the realms of possibility.”

Mr Burg isn’t expecting a recovery until mid-2027 when the Reserve Bank hints at rate cuts, which would mean a prolonged, 15-month downturn in home values that would be even worse than the early 1990s recession.

“That boost to confidence that things are getting better and if not actual rate cuts, a signal that rate cuts are imminent,” he said.

“It might be mid-2027 before we start to see those factors kind of coalesce and provide that sort of boost - a downturn might last until that sort of period.”

Sydney and Melbourne are now suffering quarterly and annual declines in both house and apartment values, following three Reserve Bank interest rates rises in 2026 and Labor’s Budget changes coming into effect in July 2027 that will restrict negative gearing to brand new homes and replace the 50 per cent capital gains tax concession with a 30 per cent tax on inflation-adjusted increases.

Across Australia, home values last month fell by 0.4 per cent, back to $937,722, marking the steepest monthly decline since December 2022 when the RBA was also raising interest rates, even with the 5 per cent deposit scheme for first homebuyers.

“I tend to think rate rises are the biggest impact because it hits the broadest category of buyers,” Mr Burg said.

“There’s almost certainly fewer investors, that’s little doubt about that but I do tend to think that first homebuyers, they have generally the lowest level of deposit and are most exposed when it comes to borrowing capacity.”

Shadow treasurer Tim Wilson rejected Mr Albanese’s suggestion a housing market slowdown would help first homebuyers.

“Instead, we have a Government that’s trying to eat into the savings of the middle class, destroying the Australian dream and trying to crash the Australian economy. I mean, it’s just disgraceful,” he said.

In Sydney, the PM’s home city, the median house price slumped by 1.5 per cent in June to $1.556 million to be 3.8 per cent weaker compared with March, and down 0.1 per cent over the year.

Melbourne, now Australia’s second most affordable State capital city market, saw its mid-point house price fall by 1.3 per cent in June and by 3.3 per cent over the quarter to finish the financial year 1.2 per cent weaker.

The Victorian capital’s median house price of $948,482 is even more affordable than the still strong markets of Brisbane ($1.225 million), Adelaide ($1.009 million) and Perth ($1.093 million).

Even in a soaring market, Adelaide house values were flat in June.

Canberra house prices dived by 0.7 per cent last month and 1.5 per cent over the quarter to $1.036 million.

Regional markets, however, are doing a lot better with house prices outside the capital cities rising by 1.1 per cent during the past three months to $788,777.

Perth was still the strongest performing market in June, with values increasing by 0.7 per cent but this is a sharp slowdown from December last year when there was a monthly increase of 1.9 per cent.

While falling home prices are good news for those getting into the market, they are bad for recent borrowers facing a situation known as negative equity where they owe their bank more than their home is worth.

Labor’s National Housing Accord plan to build 1.2 million well-located homes over the five years to June 2029 is also looking shaky with just 202,621 residential houses and units approved in the year to May, new Australian Bureau of Statistics data showed.

This is still well below the 240,000 needed a year to be on target with the new figures released two days after Master Builders Australia forecast the completion rate would fall 204,000 short.

Construction companies were the most likely to be insolvent during the last financial year with 3286 going into external administration for the first time during a housing shortage, Australian Securities and Investments Commission data showed.