Data from CoreLogic shows that house prices in Melbourne have fallen by 0.1% so far in November, after rising by 0.5% at the start of the month, following the Reserve Bank of Australia’s 0.25% rate hike on Melbourne Cup Day:
Meanwhile, growth in Sydney house prices slowed to 0.2% over the first 28 days of November, after rising by 0.7% at the start of the month.
Eliza Owen of CoreLogic says housing stock levels are running ahead of demand in Melbourne, so the Victorian capital could record negative growth for the full month:
“I think it’s quite possible that we could be reporting a negative figure for Melbourne by the end of the month because stock levels are running ahead of demand, so this market is a little oversupplied”.
“Sydney is also losing steam, but unlikely to hit negative monthly growth because values are still increasing, albeit at a dramatically slower pace over the past 28 days”.
“A buyer’s market is emerging across Sydney and Melbourne as conditions soften due to more buyer leverage, and more limited borrowing capacity in a high interest rate environment”.
“New listings have risen rapidly across Sydney and Melbourne for the past five months, and sales activity has not been high enough to fully absorb the rate at which new listings have hit the market in these two cities.
“As a result total stock levels are now on par with the historic five-year average across Sydney, and are 7.6 per cent higher than the five-year average across Melbourne”.
The below chart shows the annual change in for sale listing across Australia’s capital cities:
Source: CoreLogic
As you can see, Sydney and Melbourne have bucked the trend, with both new and total listings rising over the past 12 months.
Meanwhile, auction clearance rates have fallen sharply across both major capitals:
The change in momentum has turned Stephen Koukoulas – who was one of the only economists to pick the house price rebound – bearish on Sydney and Melbourne prices following the latest rate hike from the RBA:
“I say, it [the rate rise] could be the straw that breaks the camel’s back. The housing market was holding on there, but all of a sudden, there’s this proverbial last rate hike that’s having those detrimental effects”.
“Stock shortage is no longer as acute as it was six or 12 months ago and there’s evidence that listings are about to increase as people start to feel the strain of repaying a big mortgage”.
“A lot of the demand that came from that initial jump in population growth is still there, but it’s also moderating. At the same time, the labour market is starting to weaken and unemployment is starting to tick up”.
“So when you put all those things in together, I think we’re going to see anywhere between 3% and 5% drop in Sydney and Melbourne house prices”.
The RBA might just have delivered an early house price correction, at least for Sydney and Melbourne.
If true, this should reduce the likelihood of a follow-up rate hike in December or February.
