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A residential complex in Sydney, Australia. / EPA-Yonhap

Australia's property market is contracting at its fastest pace in 40 years, raising concerns that the country could experience its largest housing market downturn on record. Nationwide house prices continue to fall as persistently high interest rates reduce households' borrowing capacity and investment demand weakens following the federal government's announcement of tax reforms in May.

According to Australia's national broadcaster ABC News on Nov. 2 (local time), the latest national Home Value Index (HVI) released by property research firm Cotality fell 1.2% from October. This marked the seventh consecutive monthly decline, bringing the index 6.7% below its March peak. As a result, Australia's median dwelling value has fallen by 63,400 Australian dollars (approximately 59.38 million won) from its peak to 884,855 Australian dollars (approximately 828.81 million won).

In particular, housing prices across Australia's eight state and territory capitals have dropped 8.1% over the past seven months, leading the nationwide downturn. Price declines have also been recorded in major cities that previously drove market growth, including Brisbane (-2.0%), Sydney (-1.6%), Perth (-1.7%) and Adelaide (-1.2%).

Gerard Burg, head of research at Cotality, said the downturn was almost certain to surpass the previous record decline of 8.2% recorded between 2017 and 2019, describing the current slump as a "demand-led downturn" in home purchases.

Conditions on the ground are even more severe. Sam Devlin, a real estate agent with Harcourts in Brisbane, said, "Inquiries at open homes have plunged since May. Even homeowners looking to move into larger properties are hesitant to buy because they are unsure whether they can sell their existing homes at a reasonable price."

Another expert said buyers had adopted a wait-and-see approach over concerns about further interest rate increases, predicting that it would take three to four years for the market to recover to previous price levels.

Actual transaction indicators have also deteriorated sharply. Home sales over the past three months fell 23% from the same period a year earlier and 18% below the five-year average. Auction clearance rates in major cities have fallen below 50%, while the average time properties remain on the market has reached 39 days, the longest since August 2020. The average vendor discount rate also reached 4.7%, its highest level since May 2019.

Market experts expect a recovery to remain difficult until the Reserve Bank of Australia (RBA) signals a shift in monetary policy.

Nicola Powell, chief economist at Domain, said, "Buyer confidence is unlikely to recover before the second half of 2027, when discussions about cutting the benchmark interest rate are expected to begin." She added that a further decline of up to 10% from the market's peak was entirely possible.

Meanwhile, some analysts suggest that the sharp price correction could create opportunities for buyers looking to move into larger homes or purchase their first property. Melbourne's median dwelling value has fallen to 773,027 Australian dollars (approximately 724.07 million won), with price declines particularly pronounced in areas with a high concentration of expensive homes.

                                                                                                             Lee Dae-won