Falling house values in Sydney led the country, down 7.6% between May and September, while those in Melbourne fell 4.9% over the same period. Brisbane, where values were still rising as other capitals began to fall, is now showing a sharp decline in values, down 2.9% in the past two months.
Although house values have fallen since the start of the year, the rate of growth has slowed since last year, Lawless said, when fixed interest rates began to rise and the Australian Prudential and Regulation Authority reduced the maximum amount buyers could borrow.
Wheatley Finance owner and mortgage broker Andrew Wheatley said calls to refinance or renegotiate loans had grown more desperate from customers in recent months.
Although many had made contact before the rate increased to try and get a better deal, the messages he was getting were becoming more urgent.
“I have a lot of people contacting me saying ‘my mortgage payments are getting out of control and I need someone to talk to,'” Wheatley said.
“That I have [also] noticed over the last three or four months is people not rushing in and grabbing a property quickly,” he said. “Before, they had to rush to buy, because the longer it took, the more the prices rose. Waiting six months could cost a buyer $50,000 more.
Buyers’ lawyer Cate Bakos said buyers have been worried about interest rate hikes since they began in May as many realized they were qualified to borrow less from banks and worried about stretching too much financially.
“Fear has been heightened by interest rate hikes, especially for people who have never experienced them,” Bakos said. “A lot of nervous buyers apply their own caution and their own buffers, they’ll say ‘the bank said I can borrow $1.6 million, but I don’t want to go over $1.3 million’.”
Australian head of economics at Commonwealth Bank Gareth Aird said further falls in house prices could be expected as interest rates continued to rise.
“House prices will continue to fall until rates stop rising,” Aird said.
Loan values also took a hit. Data from the Australian Bureau of Statistics for July showed residential property loans fell 8.5%, following a 4.4% plunge in June, it said.
Aird has predicted prices across the country will fall 15% from peak to trough during the recession, while other banks including ANZ predict prices will fall 18%.
“It’s conditional on rates rising another 50 basis points – so 25 basis points in October and 25 in November,” Aird said. “If it goes higher, it could change the forecast – no one knows how high they will take the cash rate, including the RBA itself, which will determine how far property prices will fall.”