Australian home prices fall for second month in a row

New homes line a street in the Sydney suburb of Moorebank in Australia.

SYDNEY Reuters - Australian home prices slipped for a second month in June as red-hot markets in Sydney and Melbourne felt the chill from rising interest rates and a cost-of-living crunch.

According to CoreLogic, prices fell 0.6% in June from May, when they fell 0.1%. The huge gains made over 2021 and early 2022 resulted in prices being 11.2% higher for the year.

The city's prices dropped 0.8% in June, while annual growth fell to 8.7%, having been above 20% early this year.

Melbourne lost 1.1% of its value in Sydney, while the retreat in Sydney increased by 1.6% in the month. Annual growth in Sydney is down to 6%, a long way from the high days of 2021 when prices rose by a quarter.

Price growth is slowing down in most cities, as well as in other cities. Adelaide led with a gain of 1.3%, but Brisbane eked out a gain of just 0.1% and Perth 0.4%.

The regions continued to benefit from a shift to country living and greater space, and prices rose by 0.1% in June to be 20% higher than a year ago.

In an effort to contain inflation, the Reserve Bank of Australia RBA lifted rates in both May and June and is considered to hike again next week in an effort to contain surging inflation. AU INT Considering inflation is likely to remain high for a long time and interest rates are expected to rise substantially in response, it's likely that decline in housing values will continue to gather steam and become more widespread, said CoreLogic's research director, Tim Lawless.

Markets are betting that the current cash rate could reach 3.75% by the middle of next year. The major banks have also raised borrowing costs on fixed-rate mortgages and tightened lending standards.

A sustained drop in prices would be a drag on consumer wealth, given the notional value of Australia's 10.8 million homes, which had risen A $210 billion $144.86 billion in the first quarter alone to reach A $10.2 trillion.