In a recent release, CoreLogic said the result breaks the previous record in peak-to-trough declines which was when homes values fell 8.38 per cent between October 2017 and June 2019.

While the housing downturn between 2017 and 2019 lasted 20 months, this latest fall in values has played out in less than nine months with further falls expected in the months ahead.

The property data company attributed the significant fall in values to the recent cycle of rate hikes.

“A 300-basis point increase in the underlying cash rate over just eight months has resulted in a rapid reduction in borrowing capacity, lowering the amount buyers can offer for homes. In addition to constrained borrowing capacity, higher interest costs may be dissuading potential buyers altogether,” it stated.

CoreLogic also noted that Australians are also more indebted today compared with other historical periods of rate rises.

The Reserve Bank of Australia estimates that the latest housing-debt-to-income ratio is currently sitting at 188.5 per cent.

“A decade ago this figure was 162.0 per cent and in 2002 the ratio was 130.2 per cent. Higher household indebtedness may have increased the sensitivity of housing values to interest rate rises,” said CoreLogic.

“Higher inflationary pressures, combined with a post-lockdown surge in spending, has also eroded household savings, which could be utilised for a home loan deposit. This trend is also being reflected in low consumer sentiment figures, which has plunged to near-recessionary levels and traditionally coincides with fewer home sales.”

Softer housing demand may also reflect Australia’s ‘hangover’ from the elevated sales and listings activity through the 2021 boom, it stated, when an estimated 619,531 transactions occurred over the calendar year.

“It was the highest volume of housing sales in more than 18 years. Fuelled by record-low interest rates and stimulus such as HomeBuilder and low-deposit home loan schemes, may have brought forward many buying and selling decisions through the pandemic, resulting in less transaction activity in subsequent years,” it explained.

The bulk of the downturn has been led by the three biggest capital cities. Sydney home values have seen a peak-to-trough decline of -13.0 per cent, Brisbane values have fallen -10 per cent and Melbourne dwelling values are -8.6 per cent from the peak.

CoreLogic expects that over the coming months, housing market conditions are expected to remain soft.

“The underlying cash rate is likely to see further increases in 2023, with market expectations pricing a peak of around 4 per cent, while the median forecast from Australian economists is lower at 3.6 per cent.

“Ongoing increases in interest rates will further erode the borrowing capacity, and likely prolong the country’s housing downturn until interest rates stabilise.”