“The key change we’ve seen in our June data is that the national market is now fully in decline,”<\/p><\/blockquote>\n
he said.<\/p>\n
Mr Burg described a “perfect storm” of headwinds affecting demand, which he said began before interest rates started to rise earlier this year.<\/p>\n
“Even prior to the Reserve Bank lifting rates, we saw affordability being a considerable constraint in the market,” he said.<\/p>\n
“But then we’ve seen three rate rises, we’ve seen the impact of the Middle East conflict hitting energy costs for consumers and sentiment deteriorate already during this period, as well as the tax changes, so these factors combined have really driven this downturn that we’ve seen.”<\/p>\n
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Revised data also paints a weaker picture than previously thought, with Cotality now saying the national housing market peaked in March.<\/p>\n
Home values have fallen 0.7 per cent over the June quarter.<\/p>\n
An alternative home price index from REA Group’s PropTrack reported national prices fell 0.3 per cent in June, the third straight monthly decline.<\/p>\n
Sydney and Perth recorded the biggest falls, both down 0.5 per cent, followed by Melbourne and Canberra, which each fell 0.4 per cent. Regional markets, by contrast, held steady.<\/p>\n
Whatever dataset you look at, the trend is pointing in the same direction \u2014 house prices are weakening.<\/p>\n
Why Sydney and Melbourne are falling faster<\/p>\n
Sydney and Melbourne continued to lead the downturn but conditions were mixed elsewhere in the Cotality data.<\/p>\n
Darwin recorded the strongest monthly growth of any capital city, with values up 1.4 per cent in June, while Hobart rose 0.6 per cent.<\/p>\n
Mr Burg said the difference came down to the balance between supply and demand.<\/p>\n
“We’re seeing divergent conditions around the country, still reflecting the different imbalance between demand and supply in each of these markets,” he said.<\/p>\n
“With greater stock available for purchase in Sydney, this has seen the market there decline the fastest, while Brisbane and Perth are still the markets that have the tightest supply.”<\/p>\n
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Gerard Burg says a number of factors have combined to drive down demand. (ABC News: Darryl Torpy)<\/p>\n
Westpac senior economist Matthew Hassan agreed and noted that cities such as Brisbane, Adelaide and Perth were still experiencing exceptionally low levels of homes for sale.<\/p>\n
“In some cases we’re talking about one to two months of sales from current listings, compared with four or five months in a more balanced market,” he said.<\/p>\n
Low rental vacancy rates were also helping support those markets, despite the broader slowdown.<\/p>\n
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Matthew Hassan says tax changes have increased market uncertainty. (ABC News: Daniel Irvine)<\/p>\n
By contrast, Mr Hassan said Sydney and Melbourne entered the downturn more fully priced and were more sensitive to higher interest rates, while on-market supply was beginning to tilt back towards buyers.<\/p>\n
He said the medium-sized capitals were expected to slow, but tight supply meant a more significant correction was unlikely.<\/p>\n
“We think they’ll slow from here, perhaps with some price slippage along the way, but without a more material price correction,” Mr Hassan said.<\/p>\n
Cotality’s home value index last saw a brief decline from November 2024 to January 2025, ahead of the RBA’s interest rate cuts.<\/p>\n
The last period of a sustained fall in dwelling values was in mid-2022, when the central bank was hiking rates.<\/p>\n
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Investors retreat as uncertainty remains<\/p>\n
Mr Burg said the housing slowdown reflected a range of headwinds, but Mr Hassan believed the federal government’s housing tax changes became a significant source of ongoing uncertainty in June.<\/p>\n
“Without a shadow of a doubt, the big change was the tax policy changes announced at the federal budget,” he said.<\/p>\n
“There’s a lot of uncertainty about the impact of these policy changes, and uncertainty is poison for markets.”<\/p><\/blockquote>\n
Mr Hassan said many investors were delaying purchase decisions as they assessed how the new rules would affect future returns.<\/p>\n
Westpac is already seeing signs of that pullback in its loan book.<\/p>\n
Mr Hassan said applications for investment loans had fallen by about 20 per cent, with the bank expecting investor demand to weaken further as the policy changes flowed through the market.<\/p>\n
But he said the grandfathering provisions meant existing investors were unlikely to rush to sell, reducing the risk of a larger downturn.<\/p>\n
New-build shift yet to emerge<\/p>\n
The federal budget’s changes are intended to redirect investor demand away from established homes and towards new construction<\/a>, to increase housing supply.<\/p>\n
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