By Stella Qiu
SYDNEY, Oct 1 (Reuters) - Australian home prices fell for a sixth straight month in September as a slump in transaction volumes deepened, data showed on Thursday, with another interest rate hike this week expected to tip the market into its worst downturn in three decades.
Figures from property data firm Cotality showed national home prices fell 1.1% in September from August, when they dropped by a downwardly revised 1.2%. That left prices 5.2% below their peak and flat from a year ago.
Sydney prices fell 1.4% and are now nearly 9% below their February peak, surpassing the scale of the 2022-2023 downturn when the Reserve Bank of Australia raised interest rates by 425 basis points after COVID to tame inflation. Melbourne eased 0.7%, extending its losses from the peak to more than 7%.
Prices in Brisbane, Adelaide and Perth all slid more than 1%, surrendering some of the extraordinary 50% to 70% gains accumulated over the past five years.
Transaction volumes also fell, with sales for the past three months down 19% from a year earlier, suggesting buyers remain on the sidelines.
As a result, inventories have lifted, said Tim Lawless, research director at Cotality.
"Ironically, many prospective buyers don't have the confidence or financial capacity to buy at the moment," he said.
The RBA has flagged the housing market as a downside risk, but that did not stop it from raising interest rates for a fourth time this year on Tuesday to a 15-year high of 4.6% to fight stubborn inflation. It warned it was ready to raise rates further if needed.
A sustained slump in housing turnover has broader implications for the economy, given the sector's extensive links to industries ranging from real estate services to tradespeople and construction. Housing credit growth has also started to slow.
With the government's tax changes announced in May cooling investor demand, most economists expect a peak-to-trough fall of 10% for house prices in this cycle - which would be the biggest downturn in three decades.
HSBC forecasts a 13% drop if rates rise one more time, while AMP said it expects national average property prices to see a top-to-bottom fall of 10-15%, with Sydney, Brisbane and Adelaide likely to see the deepest declines.
"Prices aren't expected to bottom until around the June quarter next year and should start a modest recovery in 2027–28 (the year ending June 2028) as the RBA starts to shift to rate cuts," AMP Chief Economist Shane Oliver said in a statement.
(Reporting by Stella Qiu; Editing by Stephen Coates and Neil Fullick)
