In response to soaring inflation, the Reserve Bank of Australia (RBA) raised interest rates in May 2022. Since then, interest rates have continued to rise, reaching 2.85% as at November 2022. Now that debt costs a lot more to service, homebuyers aren’t borrowing as much as they did before. Compounding the challenge, homebuyers are also absorbing an inflated cost of living.

And although borrowers are factoring in rising interest rates, there’s still more downside pressure on property prices to play out, particularly since the RBA is planning further interest rate rises.

So, when will housing prices finally reach the bottom? Likely not until after interest rates stabilise and buyers know how much it will cost them to service their loans.

Increasing gross rental yields.

Falling property prices combined with rent hikes means the average income earned from residential property, as a percentage of property values, has risen. According to CoreLogic, across Australia’s capital cities, average gross rental yields have risen 0.47% since February 2022 to 3.43%. Breaking this down, the average gross rental yield for units increased by 0.57% versus houses at 0.43%.

Gross rental yields in regional areas are on average higher than in capital cities at 4.4% for houses and 3.4% for units. And increasing international migration will further boost the demand for rental properties.

Lower auction clearance rates.

When more properties get passed in at auction, this dials up the pressure on sellers to negotiate on price and terms. Clearance rates dropped to an average of 59.5% over the four weeks to 6 November 2022, from 78.5% for the same period a year ago.


Longer time on the market.

Properties now take longer to sell which means investors have more time to negotiate on price, terms and to complete due diligence. In the three months to October 2022, the time the average property was on the market stretched out to 36 days, up from 20 days in the three months to November 2021.

Regional markets are holding up better than capital cities.

Regional markets are benefiting from lower price points versus capital cities and increased demand driven by the exodus of people from capital cities. Areas within commuting distance are benefiting the most. This interest in the regions is a trend that appears to be here to stay as workers take advantage of formalised work-from-home employment arrangements.