Housing price growth has stalled across Australia ahead of interest rate hikes that are expected to accelerate the slowdown, with Sydney and Hobart already recording declines.

The latest PropTrack Home Price Index, released on Sunday, showed prices nationally and across the capital cities were flat in April.

PropTrack economist Paul Ryan said housing price growth has slowed considerably in 2022 after exceptional gains last year.

“Price growth has now stalled across the country, particularly in the major capitals,” Mr Ryan said.

Australian home prices rose 0.13% in April – the slowest monthly pace of growth since prices fell at the beginning of the COVID-19 pandemic.

With the Reserve Bank of Australia now tipped to start lifting interest rates as soon as this week, Mr Ryan said the speed of the hikes remain the biggest uncertainty for the housing market over the rest of 2022.

“The outlook for price growth remains subdued, with the speed of official interest rate hikes and wages growth the key determinants of conditions,” he said.

“In isolation, interest rate increases will accelerate the slowdown in housing price growth that we’ve seen.”

Mr Ryan noted interest rates are rising because economic conditions are very strong.

“Overall, price growth looks to be weak for some time.

“We are likely to see a period where strong labour markets and wages growth are matched by higher borrowing costs. This is unlikely to see strong price growth.

“However, in the past strong economic conditions paired with interest rate increases have often brought moderate price growth.”

After last week’s stronger-than-expected inflation data, the RBA is now widely expected to deliver the first in a series of interest rate rises at its May board meeting on Tuesday.

Economists at three of the four major banks – ANZ, National Australia Bank and Westpac – believe the RBA will raise the cash rate by 15 basis points on Tuesday, from its record low 0.1%.

Commonwealth Bank of Australia economists expect the RBA will wait until June, but said it is a close call between the cash rate target remaining unchanged or a hike in May.

Mr Ryan said widespread expectations of higher interest rates are already having an impact on prices.

“Buyers now expect borrowing rates, and borrowing capacity, to reduce significantly when the RBA starts lifting official interest rates this year. This is already weighing on prices.”

Rising fixed mortgage rates, affordability constraints, an increase in properties for sale and the impending rate hikes are contributing to the slowdown in housing price growth.

According to the Home Price Index, national dwelling prices rose 16% in the year to April.

Mr Ryan said price growth has slowed dramatically after an exceptional period of gains since mid-2020 that was fuelled by record-low borrowing costs, unprecedented shifts in housing preferences and low volumes of stock for sale.

PropTrack data showed national dwelling prices surged by 23.4% in 2021.

Sydney and Hobart record first price falls since COVID

While price growth has slowed across the capital cities, Sydney and Hobart recorded their first monthly falls since the start of the pandemic boom in prices.

The Home Price Index showed dwelling prices were unchanged across the capital cities in April, recording 0.02% monthly growth.

But prices fell by 0.1% in Sydney and 0.44% in Hobart in April, a month when housing market activity was disrupted by the Easter and Anzac Day long weekends and the federal election campaign.

Mr Ryan said price growth has slowed markedly in both cities this year.

“We’ve seen a really sharp slowdown and both of those cities, in particular, highlight affordability concerns.”

He noted the median house in Sydney is more than $1.2 million, while Hobart’s prices are now similar to Brisbane. Brisbane’s median house price is $760,000 while Hobart’s is $716,000.

Perth (up 0.45%) and Darwin (up 0.53%) were the strongest performing capitals in April, although Mr Ryan noted both cities had seen weak conditions so far in 2022.

Melbourne dwelling prices were flat in April (at 0.05% growth) for the second consecutive month and monthly price growth continued to slow in Brisbane (0.22%).

Mr Ryan said price growth in regional markets remains stronger than in the capital cities, tipping that will continue at least throughout 2022.

“Regional areas continue to benefit from relative affordability and preference shifts towards lifestyle locations and larger homes that have followed the pandemic,” he said.

“The lure of regional Australia remains strong, with property prices still in most instances significantly lower than the cities, despite recent price increases.”

Prices in regional areas increased by 23.01% over the past year, while the capital cities recorded 13.63% annual growth.

Mr Ryan also expects the Brisbane and Adelaide markets will remain strong, noting they had the appeal of city living with larger homes and lower prices.

Brisbane (26.27%), Adelaide (24.26%) and the ACT (22.79%) were the strongest performing capital city markets over the year to April.

Hobart dwelling prices were up by 20.85% annually, Sydney prices rose 13.05% and Melbourne had 9.33% growth.