Aussie house prices now down 7.1%, and falling at a 14.6% annual pace

Christopher Joye

Coolabah Capital

Aussie home values have now lost 7.1% from their May peak (at the time of the first RBA hike), and have been falling at a 14.6% annual pace over the last three months according to CoreLogic data to 12 November. The singular driver of this correction in prices has been the record interest rate increases from the RBA. Sydney prices have crashed more than 10.7% while dwelling values in Brisbane are catching up quickly having lost 7.1% since the later June peak. Brisbane home values are currently dropping at a very sharp 20.4% annual rate based on the last three months of data while the losses in Sydney have slowed somewhat to a still very striking 18.2% annual pace. The correction in the Melbourne market has been more sedate, summing to a 6.7% loss to date, and an 11.2% annual pace over the last three months. Dwelling values in Adelaide and Perth have also commenced a very gradual slide, which is still cumulatively less than 1% thus far. The recent deceleration in the speed of losses, which are still notably running at a record clip, might be a function of seasonality given house prices typically perform more strongly between September and December. It will, therefore, be interesting to watch how the market travels over the seasonally weak summer months. With the RBA likely to hike by another 25bps in December and possibly February, there is undoubtedly a lot more pain to come. This will be accentuated by the conversion of about $500 billion in home loans from fixed- to variable-rate over 2023, which will result in these households experiencing a huge increase in their mortgage rates from circa 2.0-2.25% to 5.0-6.0%. Our October 2011 forecast for a peak-to-trough correction of 15-25% nationally remains unchanged.

 


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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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