Aussie house prices suffer biggest monthly fall in August since 1983

Christopher Joye

Coolabah Capital

The great Aussie housing collapse continues to break new records with CoreLogic's 5 capital city index losing more than 1.44% in the first 29 days of August, which is the biggest monthly decline in 39 years (or since 1983) according to CoreLogic data. The August plunge has just exceeded the 1.44% loss suffered in the prior month of July 2022. And there is worse to come given we have another two days of index data to collect prior to finishing the month.

The news is worse in Australia's third biggest city, Brisbane, which has well and truly capitulated with the biggest monthly fall in home values since CoreLogic records begin in 1980 (ie, over the last 42 years). According to the latest CoreLogic index results, the Brisbane market has lost more than 1.7% over the first 29 days of August. In the prior 42 years of Brisbane housing history, the worst monthly loss was 1.5%. 

Sydney is also breaking records, registering the single largest monthly decline in house prices in the August month to date, which is a 2.1% loss, since 1985 if we exclude the record set in the prior month of July. With two days to go, the August losses may still yet beat July's draw-down.

The great Aussie housing market crash has been singularly triggered by the RBA's rate hiking cycle, which should deliver another 50 basis point increase in rates in September, hammering witless borrowers.

In Sydney, house prices are falling at a 19-20% annualised rate based on the last three months' of data. Nationally, dwelling values are shrinking at a circa 12.4% annual rate, although this has accelerated in more recent times.

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 banks have embraced this projection in recent months.

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, the RBA's research implies that Aussie house prices would have to decline by 30-40%. This is not our central forecast, however.

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Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 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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