Australian property prices declined again in January, but the pace of the downturn has continued to ease ahead of a predicted peak in interest rates later this year, new data shows.

CoreLogic figures reveal home values fell 1 per cent in January nationwide, slightly less than the 1.1 per cent recorded over December – they have now fallen 8.9 per cent from earlier peaks.

January saw the smallest national decline in national property prices since June, although CoreLogic research director Tim Lawless said the downturn is still moving “quite rapidly”.

He doesn’t expect property prices to stop falling until the RBA stops hiking interest rates.

“Once interest rates do find a ceiling there will be a move towards housing markets flattening out,” Mr Lawless told TND.

“That doesn’t mean we’re moving back towards [a] growth trajectory.

“That’s probably some time off.”

Property price falls in Sydney eased slightly to 1.2 per cent in January, pushing the median value below $1 million for the first time since the COVID-19 housing boom back in March 2021.

Price falls also eased in Melbourne (down 1.1 per cent) and in Brisbane (down 1.4 per cent).

In January, house prices fell 0.8 per cent in Adelaide and 0.3 per cent in Perth.

PropTrack, a separate housing market analytics firm, also published its January home value data on Wednesday, estimating national values fell just 0.09 per cent – 4.5 per cent below peak.

Property prices in context

Both sets of data have found the housing downturn has continued to slow nationally, though it is proceeding differently across capital cities.

Mr Lawless stressed the importance of viewing the fall in house prices in context, particularly after the massive rise in prices during the pandemic.

Therefore, while house price falls over the past year have been steep, every capital city and regional area is still posting home values above pre-pandemic levels.

That’s particularly the case in many regional areas such as the Richmond Tweed and Sunshine Coast, where house prices rose by about 50 per cent in the COVID years and have so far only lost about half of that increase in the downturn.

In fact, houses in most regional areas are still selling at a premium compared to their pre-pandemic values, with combined regional prices having fallen just 7.4 per cent after soaring by 41.6 per cent.

Medium-term outlook

Mr Lawless, like many other economists, predicts two further rate hikes in 2023 before the RBA stops its record-breaking run.

House price declines should cease once that happens, but that doesn’t mean prices will start rising again.

“The medium-term outlook is probably one more of a flattening out once interest rates stabilise than the market returning to some growth,” Mr Lawless said.

What the housing market may need to spark price growth again is some form of stimulus, which could be a future interest rate cut, a loosening in lending standards, or new first-home buyer grants.

“It depends on what catalysts might be rolled out to spark another improvement in prices,” Mr Lawless said.

The trajectory for interest rates is still unclear, with inflation reaching 7.8 per cent over the December quarter, stoking fresh fears an even larger response will be needed from the RBA during 2023.

However, a sharper-than-expected fall in retail sales over the Christmas rush is now buoying hopes the economy is slowing, which may temper any further policy response.

The RBA’s first meeting for 2023 is on Tuesday, February 7.