Nationally, house prices fell by 0.4% over the month but the most rapid decline in property values was seen in Sydney and Melbourne, according to CoreLogic's latest Home Value Index Results. 

Across the capital cities, Melbourne's housing market recorded the largest falls over the month, down -0.9% in May, following a -0.3% reduction in April.

Values were also down over the month in Perth (-0.6%), Sydney (-0.4%), Brisbane (-0.1%) and Darwin (-1.6%), but rose in Adelaide (+0.4%), Hobart (+0.8%) and Canberra (+0.5%).

The top end of the Sydney and Melbourne markets saw the biggest drops in house prices over the month, with Melbourne’s most expensive quartile of the market recording a 1.3% drop in values over the month, compared with a 0.6% fall across the broad ‘middle’ of the market and a 0.3% fall across the most affordable end.

Similarly, in Sydney, the top end of the market was down 0.6% while the lower end posted a 0.1% increase in values.

According to CoreLogic head of research Tim Lawless, these were also the sectors of the market that recorded the most significant rise in values during the most recent growth phase. 

“Melbourne’s top quartile values are still 13.9% higher than they were a year ago, while Sydney’s top quartile is up 16.5% over the year," Mr Lawless said. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.04% p.a.
6.06% p.a.
Principal & Interest
Featured Online ExclusiveUp To $4K Cashback
  • Immediate cashback upon settlement
  • $2,000 for loans up to $700,000
  • $4,000 for loans over $700,000
5.99% p.a.
5.90% p.a.
Principal & Interest
Featured Apply In Minutes
  • No application or ongoing fees. Annual rate discount
  • Unlimited redraws & additional repayments. LVR <80%
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

Despite the drop in values, Mr Lawless said the damage had been far less worse than expected.

“Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction," Mr Lawless said.

"With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected."

Over the last few months, the house price predictions have been flowing thick and fast.

Commonwealth Bank, SQM Research and NAB were all predicting house price falls of up to 30% in a worst case scenario

NAB and ANZ believe an average 10% drop in house prices nationally is more likely. NAB believes Sydney and Melbourne house prices could fall 15% over the next 12 to 18 months, while ANZ is predicting a 13% drop for both cities. 

Bank conglomerate HSBC has estimated house prices could fall anywhere between 2% and 12% nationally, with Sydney and Melbourne the worst impacted markets with falls of 15% and 17% respectively.

Mr Lawless said the longer term outlook still remains uncertain.

“Eventually government stimulus will wind back and borrower repayment holidays will expire. In the absence of these policies, housing values could come under some additional downwards pressure if economic conditions haven’t picked up towards the end of the year,” said Mr Lawless.

“Once stimulus measures start to taper and repayment holidays expire, this is where we could see a rise in mortgage arrears, and the potential for a lift in distressed sales."

Sydney, Melbourne could see 10% price falls, says AMP

AMP chief economist Shane Oliver said while it appears a crisis has been averted, further price falls are ahead. 

"Further falls in prices are still likely as "true" unemployment (to become clear after September) remains high for several years, government support measures and the bank payment holiday end after September immigration falls and likely government measures boost housing construction," Mr Oliver said.

"Our base case is for national average prices to fall around 5-10% into next year. Sydney & Melbourne are likely to see 10% falls as they are more exposed to immigration and have higher debt levels whereas Adelaide, Brisbane, Perth & Hobart are only likely to see small falls and Canberra prices are likely to be flat."

Mr Oliver said a 20% to 30% drop in house prices was unlikely and would require another wave of infections.

"Our worst-case scenario for a 20% decline in prices and those of others seeing 30% plus falls are unlikely thanks to support measures and the earlier reopening of the economy.

"To get these worst-case scenarios would require a “second wave” of coronavirus cases & so a renewed shutdown or another down leg in the economy in response to a surge in bankruptcies," Mr Oliver said. 

Ready, Set, Buy!

Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!

With bonus Q&A sheet and Crossword!

By subscribing you agree to our privacy policy