Since the Reserve Bank started lifting interest rates in May,total retail sales have climbed by a modest 1.2 per cent. There have been large falls in the value of sales through department stores,clothing and footwear,household goods and in other retailing. Sales through cafes and restaurants have improved by 8 per cent since May but they have been effectively flat since September.
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EY chief economist Cherelle Murphy said the impact of rising interest rates,high inflation and economic uncertainty was clearly making households rethink their spending.
“There is no doubt now that consumers are tightening their belts,” she said. “This broad-based fall in retail sales is one of the first signs that rate hikes are starting to impact consumer behaviour.”
CoreLogic on Wednesday reported national home values are now down 8.9 per cent from the peak in April last year after another 1 per cent fall in January. According to the CoreLogic home value index,it is the fastest and largest fall since its records began in 1980.
In Sydney,housing values fell by 1.2 per cent in January to be 13.8 per cent down from their peak in January last year. The city’s median house price has fallen from a high of more than $1.4 million to just over $1.2 million.
Melbourne’s median house value fell 1.1 per cent last month to be 9.3 per cent below their February peak. It now sits just above $900,000.
House values are now falling in every state capital city with drops of 1.6 per cent in both Brisbane and Hobart.
Property prices in Sydney and Melbourne started falling before the Reserve Bank started lifting interest rates in May. Data from the Australian Bureau of Statistics suggest the impact of those rate rises is broadening.
KPMG senior economist Sarah Hunter said the change in household spending will give the Reserve Bank board pause for thought. Economists and the market expect the board to lift the official cash rate by a quarter of a percentage point to 3.35 per cent at next Tuesday’s meeting.
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“Households are clearly feeling the squeeze from higher prices and rising mortgage costs,” she said.
CoreLogic’s research director Tim Lawless said the situation would have been worse but for the sharp fall in the number of properties on the market. The total number is 24.5 per cent below its 5-year average and 22 per cent down on where they were a year ago.
“We’ve had a relatively controlled decline in values,” he said. “It is the biggest decline we’ve ever seen but we would probably be seeing much larger falls in prices if not for the drop in listings.”
While prices are falling,the sharp increase in prices through the pandemic still has many home buyers sitting on a substantial capital gain.
Brisbane housing values skyrocketed by 42.7 per cent through the pandemic to June last year,and have since fallen 10.8 per cent - the largest decline on record for that city. The median Brisbane house price is now $773,500.
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