Australian house prices are now falling at an annual rate of more than 15% – Christopher Joye

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Australian home values ​​are now declining at an annualized rate that exceeds 15% based on the three months of composition-adjusted CoreLogic index data to September 10. In Australia’s largest city, Sydney, the annual rate of house price depreciation has stabilized at 22% since late August. Property values ​​in the country’s second largest metropolis, Melbourne, are falling 14-15% annualized.

While the two largest conurbations have driven what is expected to become a record housing correction since the RBA began raising interest rates in May 2022, there is emerging evidence that the third largest city, Brisbane, is catching up quickly its delay. In August, Sydney home values ​​fell 2.3%, the worst monthly loss since the early 1980s. Brisbane property suffered a similar fate, plunging 1.9% in August, which was the poorest monthly result since records began 40 years ago in 1980.

In the first 10 days of September, the speed at which house prices in Brisbane are contracting slightly outpaced the decline achieved in Sydney. In the month to date, Brisbane home values ​​have fallen 0.51%, a shade worse than Sydney’s 0.46% pullback.

Sydney home values ​​have now fallen around 8% from their recent high based on data covering the period to September 10 according to CoreLogic. The Melbourne market is maintaining a rate of house price decline of around 1% per month, with peak-to-trough losses crossing the 5% mark in September. In Australian capitals, cumulative house price losses are also expected to exceed 5% this month…

Sydney home values ​​have fallen by around 8% in recent months
Australian house prices fall at an annual rate of 15%

While these developments may come as a surprise, they were highly predictable, as we explained last year. And our real estate forecast for October 2021 remains unchanged. In other words, after the RBA implements its first 100 basis points of rate hikes, which it has now done, domestic home values ​​will fall by 15-25%. This forecast range was quite explicitly designed to capture the RBA’s upside rates in After greater than 100 basis points. Most economists have adopted this projection in 2022.

Using the RBA’s own internal housing model, we have previously shown (see here) that if the central bank increases to a very extreme cash rate of 4.25%, which is higher than what we allowed in our forecast range, RBA research implies that Australian home prices are likely to fall by 30-40%. However, this is not our central forecast.

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