Sydney prices are on track for another truly massive drop of around 2% per month according to data from CoreLogic. They fell 2.2% in July, the worst result in some 40 years, and have plunged another 1.7% in the first 25 days of August alone. Sydney housing has now lost more than 7% of its value since its recent peak.
Brisbane is also sinking as we warned, overtaking Melbourne with a hefty 1.3% loss over the last 25 days. Melbourne home values have dropped another 0.9% in the first few weeks of August. Since their recent peaks, house values in Brisbane and Melbourne have fallen by more than 2.5% and 4.3%, respectively.
In Australia’s 5 largest capitals, the national index has fallen a hefty 1.2% in August and is more than 4.0% below its recent highs. At this rate, prices in the Australian capital will have lost more than 7% by the end of the year.
According to daily data for the last quarter, Sydney housing is collapsing at an annual rate of 19.2%. Nationwide, home values are shrinking at a dizzying 12.1% annual rate.
That puts the market on track for the biggest correction in more than 30 years (the record during this period is held by the 10-11% drop between 2017 and 2019).
Our October 2021 forecast remains unchanged. That is, after the RBA implements its first 100 basis points of rate hikes, which it has already done, national home values will fall between 15% and 25%. This forecast range was designed quite explicitly to capture the RBA’s rate of increase of more than 100 basis points. Most banks have adopted this projection in recent months.
Using the RBA’s own internal housing model, we have previously shown (see here) that if the central bank raises to a very extreme cash rate, 4.25%, the RBA research implies that house prices in Australia would have to decline by 30-40%. This is not our forecast, however.
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