CoreLogic’s daily dwelling values index, which measures price changes across Australia’s five largest capital city markets, rose another 0.6% in the week ended 28 April:
Sydney and Melbourne both fell by 0.05%, whereas the other major capitals recorded strong rises in values:
So far in April, dwelling values across the five major capitals have risen by 0.27%. Sydney’s home values have fallen by 0.24% and Melbourne’s by 0.10%. By contrast, the other major capitals have recorded strong rises:
Over the most recent quarter, dwelling values across the major capitals have risen 0.9%. Sydney home values have fallen by 0.6%, with Melbourne’s down 0.2%. By contrast, strong growth has been registered in Brisbane (+6.1%) and Adelaide (+5.5%), whereas Perth’s dwelling values have risen 2.3%:
The next chart plots the quarterly change in dwelling values. Of particular note, Sydney has gone from price leader in May 2021 to prices falling the fastest:
With interest rates tipped to rise sharply over the coming year, dwelling values nationally should begin to fall.
Sydney’s housing market will likely be hit the hardest given it experienced the sharpest increase in values during the early stages of the pandemic and is the most expensive housing market in the nation with the most indebted households.
If the median economist forecast is correct, and the Reserve Bank increases the cash rate by around 2%, then Sydney dwelling values could potentially fall by 15% to 20% peak-to-trough.
For what it is worth, I expect a smaller increase in the cash rate to 1.25% and, therefore, a smaller correction in dwelling values.
