Aussie house prices now falling at more than a 15% annual rate

Christopher Joye

Coolabah Capital

Australian home values are now shrinking at an annualised rate that exceeds 15% based on the three months of CoreLogic compositionally-adjusted index data to 10 September. In Australia's largest city, Sydney, the annual pace of house price depreciation has stabilised at a hefty 22% since late August. Property values in the nation's second largest metropolis, Melbourne, are falling at 14-15% annualised clip. 

While the two biggest conurbations have led what is bound to become a record housing correction since the RBA started lifting interest rates in May 2022, there is nascent evidence that the third largest city, Brisbane, is quickly catching up. In the month of August, Sydney home values tumbled by 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 outcome since records began 40 years ago in 1980.

Over the first 10 days of September the speed at which Brisbane dwelling prices are contracting has slightly exceeded the draw-down realised in Sydney. In the month to date, Brisbane home values have dropped by a chunky 0.51%, a shade worse than the 0.46% retrenchment registered in Sydney. 

Sydney home values have now fallen by about 8% from their recent peak based on data covering the period to September 10 according to CoreLogic. The Melbourne market is maintaining a circa 1% per month rate of house price declines with peak-to-trough losses passing through the 5% mark in September. Across Australia's capital cities, cumulative house price losses should also breach 5% this month...

Sydney home values have shrunk by about 8% in recent months
Sydney home values have shrunk by about 8% in recent months
Aussie house prices are declining at a 15% annual pace
Aussie house prices are declining at a 15% annual pace

While these developments might come as a surprise, they have been highly predictable, as we explained last year. And our October 2021 housing forecasts remain unchanged. That is, after the RBA implements its first 100 basis points of rate hikes, which it has now done, national home values will fall 15-25%. This forecast range was quite explicitly designed to capture the RBA hiking rates by more than 100 basis points. Most economists have embraced this projection in 2022.

Using the RBA's own internal housing model, we have previously shown (see here) that if the central bank hikes to a very extreme, 4.25% cash rate, which is higher than we allowed in our forecast range, the RBA's research implies that Aussie house prices would have to decline by 30-40%. This is not, however, our central forecast.  

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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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