Average mortgage rates have more than doubled since the Reserve Bank began its hiking cycle in May last year, but not everyone is being impacted equally.
The impact of the 10 consecutive interest rate rises seen so far has been to curtail the average buyer's borrowing capacity by around 30%. With buyers able to borrow less, the total amount they can spend has fallen and this has reduced prices.
Home prices have fallen by 3.9% from peak levels nationally, with the largest falls seen in Sydney, down 7%, and Melbourne, down 6%.
However, interest rates aren’t the only driver of property prices in Australia.
To date, the level of price falls has been cushioned by lower levels of properties being listed for sale, effectively reducing supply.
Similarly, a slowdown in development activity in combination with an acceleration in population growth could place a floor under how far prices can fall over the coming years.
So far borrowing capacities have decreased to a far larger extent than prices have fallen, pricing some buyers out of certain areas, so we will see more affordable regions continuing to outperform.
This is drawing more buyers to affordable suburbs and regions, helping to support demand and prices in these areas.
In contrast to the declines seen in the market at large, prices have held steady and, in certain cases even increased, in many of the more affordable suburbs. A trend that looks set to continue.