Sydney’s house price bust gathers steam

CoreLogic’s daily index shows that Sydney is leading Australia’s nascent housing market downturn, record a 1.0% decline in dwelling values over the quarter to be down 1.3% from mid-February’s price peak:

Quarterly Australian house price growth

Sydney goes from boom to bust.

Westpac’s latest Housing Pulse shows a “sharp deterioration” across NSW housing indicators, suggesting there is “more to come near term” for Sydney’s house price correction:

The boom is well and truly over in NSW. Turnover has fallen back sharply since the start of the year with Sydney dwelling prices now seeing slight declines. Our sentiment–based indicators suggest there is more to come near term.

Market turnover is off by nearly a quarter from its Dec peak to be back near its pre–COVID levels and below long run averages as a share of the dwelling stock.

NSW housing turnover

Auction activity suggests the shift gained momentum following the RBA’s May interest rate rise, clearance rates falling to the 50–55% range mid–month and 20–25% of properties withdrawn prior to auction, volumes also subdued.

The latest price data is also showing a very clear signal, Sydney posting slight declines through each of the three months to Apr and the May month to date tracking a more meaningful 0.8% drop.

Sydney dwelling prices

The price detail shows a more abrupt turnaround for houses and ‘top tier’ segments in Sydney after outperforming by a wide margin during the upturn. The ‘city and inner south’ has seen a more pronounced fall, fringe metro areas out–performing. Regional slowdowns have also been much milder.

The sharp turnaround is seeing the on–market supply–demand balance shift quickly, total listings already back to to just over three months of sales, a touch above the long run average. However houses are still in short supply compared to units.

The NSW Consumer Housing Sentiment index points to a further significant decline in turnover near term. The May index read is consistent with another 15% decline in sales through the Sep quarter.

As illustrated in the first chart above, Sydney led the nation’s dwelling price growth over the first 18 months of the pandemic, which has driven the city’s median dwelling value to an insane $1.13 million – 36% above the combined capital city average.

Sydney’s extreme unaffordability, combined with the fact that it has the nation’s most indebted households, means that it is most sensitive to interest rate hikes and should continue to lead the nation’s property price correction.

Unconventional Economist
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    • Great post as usual and even greater thread. Loved the queue of limos at Davos and the idiots in the US senate speaking to Alex Epstein

      • My understanding is that this occurred Australia wide, WA had the old State Housing Commission and many suburbs of Perth had plenty of State Housing homes including Balga, Nollamara, Osbourne Park, Mirrabooka, Balcatta, Glendalough, Hilton, Freo area and on and on. In addition to state housing were the War Services Homes where return overseas servicemen could buy a home with a fixed IR. The number of homes tied up in this was massive, most people I went to school with in the 60s were mostly SHC or WSHs.

        Housing policy changes in the early 80s saw them sold off to the occupants with the state pulling out of building new stock and instead providing rental support and we know how that has worked out. This was just part and parcel of the selling off of gov assets that still continues.

  1. elasticMEMBER

    It won’t take much for overall credit growth to head to zero once total turnover drops by 25% nationally. If new credit falls from 40B to 30B monthly then the 6% growth we’ve been seeing will evaporate as it has been based on record levels of turnover.
    I’m not sure how the RBA will respond to that as the interest rate rises are just getting started. Recession incoming