Australia’s Housing Market Worsens

Australia's housing downturn is accelerating with the biggest price declines since late 2022, driven by higher interest rates and weaker investor demand. REA Group Senior Economist Anne Flaherty expects further home price falls through year-end, especially in expensive suburbs, and warns that if the RBA hikes again, declines could steepen. She also sees a growing divergence between resilient affordable properties and weakening high-end suburbs, while rental supply constraints could push rents higher. - Australian home prices fell in June and July by the most since December 2022. - Higher interest rates and tax changes are weighing on buyer demand; investors have pulled back. - Further price declines are likely through year-end, with a risk of another RBA hike increasing the pace. - Affordable homes under the government's 5% deposit scheme remain resilient, while expensive suburbs see stronger falls. - Buyer budgets are constrained and borrowing capacity is limited until rates fall. - Consumer sentiment is weak, but some improvement was seen in June. - Rental vacancy rates could tighten and push rents higher as investor incentives decrease and new affordable supply remains scarce.