Australian Home Prices Plunge Towards Worst Slump in Three Decades

Australian home prices have fallen for six consecutive months, putting them on track for their worst slump in three decades. According to data from property firm Cotality, national home prices dropped by 1.1% in September compared to August.

The decline has been attributed to persistent inflation pressure and high interest rates, which are expected to remain elevated in the coming months. George Tharenou, chief economist at UBS, predicts that dwelling prices will continue to fall for at least a year, with a peak-to-trough drop of around 10%.

UBS notes that this would be the largest downturn since records began in 1980, surpassing the current record of an 8.9% drop between 2022 and 2023. The Reserve Bank of Australia (RBA) has played down the impact of the housing market on the economy, stating that even a further price fall of 20% would still leave only 5% of borrowers at risk of defaulting on their loans.

The RBA raised interest rates for a fourth time this year to a 15-year high of 4.6% to combat stubborn inflation, warning it was prepared to raise rates further if necessary. The housing market has been hit by decades of low interest rates and generous tax breaks, which have supercharged property prices and lifted the value of Australia's residential stock above A$12 trillion.