Australia's Housing Market Slows Down Amid Rising Borrowing Costs

Australia's housing market is experiencing its worst slowdown since the pandemic, driven by rising borrowing costs and a reversal of tax breaks that had fueled record home prices.

The Reserve Bank of Australia raised interest rates three times between February and May to tame inflation, which had been fueled in part by the Iran war. As a result, the housing market is slowing more than expected, according to RBA Governor Michele Bullock.

Buyers and sellers are stepping back as house price appreciation no longer seems inevitable, with home prices in Sydney and Melbourne down nearly 5% so far this year. Fewer people are attending open houses, auction clearance rates have plummeted, and loan inquiries have dropped by 14% in June from a year earlier.

The slowdown is having a ripple effect on the broader economy, with real estate agents, removalists, and tradespeople starting to see less work. State governments are bracing for large write-downs in vital stamp-duty revenue, with New South Wales cutting its forecasts by A$5.3 billion over the next four years.