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Soaring interest rates, high inflation and the end of the COVID-pandemic price surge have combined to deliver the Melbourne and Sydney property markets their biggest annual correction in three decades with softness set to continue into the new year.
As new research shows a failed auction result leaves a “bad smell” that pulls down the property price by tens of thousands of dollars, the year of 2022 will mark the softest property sectors in the nation’s two largest cities since the 1990-91 recession.
New research shows if a property fails to sell at auction, it faces a price drop of 2.6 per cent.Credit:Peter Rae
Based on CoreLogic’s daily measure of home values, Sydney values tumbled by 12.3 per cent through 2022. All of that fall has been since late March with a drop of 1.4 per cent in December alone.
Despite the fall, the city’s property values are still 10 per cent above their pre-COVID levels due to a strong increase between mid-2020 and the end of 2021.
Melbourne values dropped 8 per cent through 2022 including 1.2 per cent in December. Values are now less than 2 per cent above their pre-COVID levels.
Sydney and Melbourne have borne the brunt of this year’s price correction. Values in Brisbane have edged down 0.6 per cent while they are both still up in Perth (3.6 per cent) and Adelaide (8.8 per cent).
The softness is being driven by the sharp lift in official interest rates, the Reserve Bank taking the cash rate to 3.1 per cent from 0.1 per cent since May. High inflation and falling real wages are also weighing on the ability of households to push up property prices, which soared by almost 30 per cent during the pandemic.
NAB economists are among many expecting house