Sydney House Prices Fall for First Time Since 2020 as Boom Fades

(Bloomberg) -- Sydney home prices have fallen for the first time in 17 months, signaling that Australia's housing boom fueled by the pandemic and ultra-low interest rates is all but over.

Australia's most populous city recorded a 0.1% decrease in prices in February, while values in Melbourne were unchanged, according to a CoreLogic Inc. report Tuesday. Although house prices are still generally rising across the country, the national monthly growth rate of 0.6% came in as the lowest since October 2020.

The country's housing boom, mirrored in other countries during the pandemic, is fizzling out ahead of a widely expected tightening cycle by the central bank. Commonwealth Bank of Australia, the nation's largest lender, expects prices to fall 10% next year, led by a 12% drop in Sydney, as it forecasts a spike in the benchmark interest rate to 1.25% from its current 0.10%.

“With rising global uncertainty and the potential for weaker consumer sentiment amidst tighter monetary policy settings, the downside risk for housing markets has become more pronounced in recent months,” said Tim Lawless, CoreLogic's director of research.

National home values were 20.6% higher over the past 12 months, down from what's likely to be the peak rate of annual growth recorded at 22.4% in February, according to the report.

Housing affordability has also become a key issue, with low income growth failing to match the soaring prices of homes during the pandemic. Between March 2020 and December 2021, wages increased 3.3% compared to the 22.6% lift in dwelling values.

Since the onset of the pandemic in March 2020, Australian housing costs have risen by 24.6%, adding an average A$144,000 ($105,000) to home values, according to CoreLogic. That's pushed the median price of a Sydney home to A$1.12 million.