CoreLogic’s daily dwelling values index tanked in the week ending 23 June, plunging by 0.33% across the five major capitals – the biggest weekly decline since January 2019:

Biggest weekly decline in house prices since January 2019.
Every major capital city market experienced price falls, with the exception of Adelaide:

Adelaide the last housing market standing.
Sydney and Melbourne house prices are tanking, down 1.13% and 0.79% respectively so far in June, which has dragged values at the 5-city level down 0.60%

Big corrections underway for Sydney and Melbourne.
Quarterly values also continue to plummet, with Sydney down 2.4% and Melbourne’s down 1.5%. These falls have offset increases across the other markets, driving values down 0.6% at the 5-city level:

Sydney and Melbourne lead the housing correction.
Sydney dwelling values have fallen 2.7% since peaking in mid-February, whereas Melbourne’s are down 1.7% from its peak.
The great Australian housing correction has clearly begun, led by Sydney and Melbourne. How deep it goes will depend on how aggressively the Reserve Bank hikes interest rates.
If the futures market is correct, and mortgage rates more than double to 7.5% by mid-2023, then both cities are staring at the prospect of their biggest price crashes in 100 years.
- Still no hard evidence of a wage-inflation spiral - June 27, 2022
- RBA triggers Sydney housing market collapse - June 27, 2022
- Links 27 June 2022 - June 27, 2022
That’s so sad lol.
I know I am crying about it, tears of joy.
No wobbly heads here 😉
https://youtu.be/YB2S34gyf6w
Embattled Victorian building company Snowdon Developments allegedly can’t pay superannuation to staff
https://www.news.com.au/finance/business/other-industries/embattled-victorian-building-company-snowdon-developments-allegedly-cant-pay-superannuation-to-staff/news-story/9e0067f250efdc7c7c7041a0e9b9e9fd
Video
https://youtu.be/w9Ti9_OO3mA
As fixed mortgages end and rates rise, many risk losing their homes
https://www.abc.net.au/news/2022-06-23/homeowners-interest-rate-rises-mortgage-defaults-home-loans/101175258
Read that one. Reckon fewer people will plan according to RBA forecasting now.
Just the start of “it woz the RBA’s/Bank/mortgage broker/primary school for not teaching me maths fault”
She’s going to have a lot more to worry about than refinances
1 If she payed $1.65M around, it’ll be worth under $1M next year
2 she will be in deep negative equity
3 Her bank maybe gone
This is going to affect us all.
Sally don’t worry about your repayment, there may not be anyone to pay it to
If a house falls in a forest and there is no bank around to hear it, did it really happen?
Nice!
Economic collapse is now unavoidable as central bank ‘intervention’ to benefit the small group at the top of the pyramid has now finished.
“They’ll’ be fine ( don’t you worry) but everyone else will not.
Prepare for the largest transfer of wealth in the planet’s history. Plummeting purchasing power (already in motion from inflation) and rapidly decreasing equity based asset values will annihilate the heavily indebted.
Welcome to the ‘consequences’ of insane and corruption fueled economic management; the monetary defibrillator will no longer work,
Dimon says prepare for an economic hurricane! Cat IV for sure!
Indeed!
If Ukraine isn’t settled before NH winter, and/or Europe doesn’t start burning coal again, expect massive inflation in energy, which will of course be blindly met with rising interest rates at the end of this year (from probably October?) into next year. And that will pretty much finish everyone off.
What does European energy prices have to do with Australia? Well, not all that much other than spot price (and we could nationalise or whatever to counter that, too), but the important aspect is interest rates. If UK, US and EU all hike interest rates into an energy crisis then AU will have little choice but to follow them up.
bnich, the Flavor Flav of doom. There’s a bit of bad news and then, from the comments comes a “Yeah, boyeeeeee!” followed by some lines of greater doom and torment.
If someone posted that a flesh eating virus has been unleashed on the world you’d post that it doesn’t matter because the sun is getting so hot with the tweak in atmosphere making it a giant magnifying glass we are all going to be incinerated like ants sufferings the cruelty of young children bored on a weekday afternoon.
Footsore
You can’t even imagine what’s ahead
It’s way worse than I’m even describing
It’s going to be catastrophic
The whole world financial system is going to collapse
Just look at what’s happening now it’s starting to crumble & leak now
It’s barely holding together
Their QE BRRRRRR has created this mess
Think 1 more pivot
Bond yields are falling now back to zero but it won’t stop the property crash, it’s the crash that will push the cash rate & bonds negative
Don’t be surprised to see the Aust 10 year fall here from 4% to negative 2% & cash rate will get up to 2% around July & Aug & then will fall to I’d say negative 2% next year
They’ll do what they can to hold the banks up but won’t make any difference
Divya asked me why falling rates won’t save property because it’s the crashing property taking banks down that will take rates down as RBA prints more than 1 trillion
All that printing again is going to create hyperinflation
Don’t worry you are going to see it first hand.
Rates will just keep rising all decade to 1989 levels
17 plus %
To be fair, that’s how short-sellers work. No good being wishy washy, it’s all-in doom and gloom and spread it as far and wide as you can, secret data, nudges and winks etc. Watch the drop, close your position, buy some more marching powder then off you go again. I genuinely admire them, they are the ultimate salespeople.
Phil
The short sellers are about to get crucified
Going to be a blood bath
Fed pivot is going to blow their heads off
The mother of all short squeezes not far away
The “bcnich scenario” could easily have been avoided, and it actually looked like they were preparing to steer that way, but then, the same as 2007, they pulled it and for some reason stopped the debt economy from doing what the debt economy does… especially when interest rates zero out.
Now we feel the effects and they wont be nice.
Bnich, bit confused, you first say cash rate is going to -2% then in next sentence you say interest rates are going to be 17%?
Bit cryptic, but I think it’s along the lines of CBs taking rates to -2% in the near term, 12 mths …….. then all really turns to sh!t and real risk premium drives it to 17% over 4, 5 yrs. That’s my take anyway
Negative 2% in the crisis as the banks collapse
Solution BRRRRRRR
Huge inflation 4/5 years down the track with high int rates
There she blows…..
Of course the biggest decline in 100 years is coming. It just went up 15% in 18 months on the back of the biggest ponzi since tulips. It will possibly come down faster and, guarenteed much further. The crash has begun.
“The crash has begun” I remember reading that a lot here when Macrobusiness had a black background… Ah, the good old days.
Yep I was one of the ones laughing. This one is real deal. Never think just because something hasn’t happened, that something can’t happen. Things a monumentally worse with less handles to pull.
It was always coming
You won’t have core logic readings
Most of the banks are going under
It’ll be very hard to borrow money & nearly no buyers around.
LOLOLOL
You won’t be laughing when this all plays out
Bnich, bit confused, above, you first say cash rate is going to -2% then in next sentence you say interest rates are going to be 17%?
To be fair, Reusa has been right a lot more than you Bcnich
The year 2023 has never happened before so going off historical data it is very unlikely that next year will be 2023.
Much has been written and many claims made about the trajectory of the Australian and New Zealand housing markets. a Citi bank last week in regard New Zealand wrote( incorrectly) “But the next six months are crucial, when most of the current fixed-rate mortgages are due for a rate-reset”…The RBNZ provides data “Banks: Assets – Loans fully secured by residential mortgage, by time until next repricing , this is held here at S33 https://www.rbnz.govt.nz/statistics/series/registered-banks/banks-assets-loans-by-sector banks-assets-loans-fully-secured-by-residential-mortgage,basically how mortgages will pass thru the snake, interestingly there has been a noticeable shift to longer rates (at lower rates)
and historic simple average mortgage rates are found at B20 https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/new-residential-mortgage-standard-interest-rates
Given Australia has 55 percent of its mortgage book on variable rates and a disproportionate amount on interest only terms, if market pricing is correct ,( and all banks are certainly talking their book) then where ever the New Zealand market heads, the Australian housing market will get there much quicker
Just curious – does the figure of 55% include money in offset accounts, or has this been deducted? For example, I have a variable rate loan of $700k on my PPR but it is fully offset.
I’ve asked this question in the past as well without an answer.
My assumption is that it doesn’t include offset accounts, as there’s basically nothing the bank can do to stop you draining that at a moment’s notice.
I would expect at some point the banks will drain customers’ offsets for their own purposes. Yeah “not nice” but it is the bank’s money not yours!
I’m curious as to the ‘purposes’ the bank could use a customer’s offset account for? Do you mean simply applying it to the loan balance permanently and closing the offset account?
Two words. “Bank Holiday”.
Yes
An offset account is a seperate bank account that is invisibly linked to the loan but is completely seperate so I am unsure how that could be counted unles the banks somehow report it as so
No, revolving credit( New Zealand) yes
Ahh, so that explains the difference between the Aus and NZ statistics. Anyway, I guess this is just an issue about timing. Within a couple of years, virtually everybody will be on variable rates again.
How long until the Fed pivots?
6 months
Will a bank settlement crisis develop before then, and really put the boot into the construction industry, and thus the Aussie economy.
Seems inevitable – the rate of change in direction for QE and rates is almost like it’s intentional (so they can reverse direction on the new buggy man and inflate some more). Rates will be zero again within 2 years is my guess.
That what it feels like, hike like hell in the short-run. It is almost as if they know the bad medicine can no longer avoided, so take double now for extreme immediate pain, then buy back in at the bottom of the crash as the CB ease back to ZIRP/NIRP and asset prices soar again.
Wash, rinse & repeat.
6 weeks
This is far more likely than 6 months.
Get with the program: it is 18 months or nothing at all.
Ah yeah you’re right
18mths
Much of this is being caused by a black swan even?
Phil Lowe said no rises until 2024. Are all you guys smarter than his team?
One did not need to be a savant economique in 2021 to see that inflation was not transitory. It was obvious that global government debt was the driving force behind the insistence.
Risk always turns into issue through a trigger event – call it black swan or whatever – and central banks cannot hide behind the unexpected trigger when virtually no preparations were made for worst case scenarios when the going was good.
And, no, I don’t think I am smarter than all the guys at the RBA. Which makes me wonder why Martin Place was caught with their pants down?
If it was obvious which I agree why was macrobusiness so firm inflation was transitory all year. They had seminars constantly fighting anyone who said inflation was getting worse, they said bond yields were going down to 0 & the Aust 10 year went above 4% what a move from under 1%
Inflation is NEVER transitory.
Speaking as a retail store owner. Once a business puts the prices up, we are not going to drop them.
The only thing that would cause me to do that, is a recession or if every single one of my competition dropped their prices – and they don’t want to do that either.
While every word uttered by the US Fed is meticulously analyzed, nobody pays much attention to what Phil Lowe says. When the US Fed raises interest rate, RBA will follow.
Yes, many people *were* publicly criticizing him at the time for making such statements (Peter Costello, for instance). And Yes, many of my friends (which include quants with PhD’s in mathematics) certainly *are* smarter than his team and could easily have done a much better job.
Anecdote. (From our 5th largest city. Pop circa 150k, and one of the mid-tier RE agents). But it’s the general mood here at the moment where very few properties For Sale are now going to auction. Most are By Negotiation, but more every day now have a sticker price.
Seen this here in Brisbane. I’m looking forward to attending a few auctions again tomorrow – just to take the temperature. RE agents are now having to earn their $$
Watched a couple online on Wed night. Very slow going where 6 months ago would have been a lit bull in a fireworks factory. Pauses during the auction no doubt as the REA’s had a word in the vendor’s ears that if they pass it in now, they won’t be getting that price again.
I’m looking for a new stimulation
Quite bored of those inflation lies
I’m looking for a new rock sensation
Dead fish don’t swim around in jealous tides
Tumble in the rough
I thought tumble is a circular motion like tumble dryer
So the title of this article a bit confusing are the prices going up or down?
More like a reverse tumble dryer I do believe 😉
To tumble is to roll uncontrollably due to the interaction between gravity and a slope.
Personally I’m waiting for house prices to “ragdoll!”
https://en.wikipedia.org/wiki/Ragdoll_physics
They always laughed at her when she came into town
Called her rag doll
Little rag doll
Such a pretty face should be dressed in lace
Ooh, ooh ooh ooh ooh
Ooh ooh ooh ooh ooh ooh
(Shag rag doll)
I expect there are some inconsistencies in the data and therefore will no longer be published in coming months.
Well observed. There is no point giving attention to facts that do not serve the narrative.
Just so you know how far and long Australian land prices could fall………the houses built on it these days barely last 15 years before they become money pits
https://twitter.com/Haymaker_0/status/1539981383929585664
Yeh I’ve often wondered if many houses would make it through a 25-30 year loan term without a full rebuild.
JALNSM. Nothing to see here.
Keep calm and carrry-trade on.
Tumble? LOLOLOL
Would you prefer a tussle?
Without wishing to sound like a pedant, that’s the first time I have ever heard 33bps described as a plunge. Like saying petrol prices plunged from $2.20 to $2.19
That’s in a week and includes 5 cities. That would be 17% for the year if it continued and Sydney going down 0.52 a week would be 27% a year. In that context I think plunge is an ok term to use.
A 27% fall wipes out a previous 37% gain. Ouch
I agree -27% over 12 months is a plunge. But extrapolating across a further 51 data points to say the original data point is a plunge? Not sure about that methodology, seems to imply a bit of artistic licence (which admittedly is a feature not a bug on this site).
it’s also a hat/tip (perhaps unintended) by Leith to an old MB meme from yesteryear. I can’t recall which of the punters started it and this is in no way directed you you Phil, but the meme went:
(with respect to these daily movements in price up, and then later, down) “annualise this ‘[email protected]”
the original punter was, to be polite, a very vocal property bull.
I wear a ‘[email protected] badge with pride 🙂 Evidenced by the fact that I commented on property prices, a sure fire way to get skewered from all angles.
If only we knew how many times a year this meme was employed.
I’m sensing a definite mood for a noughties revival ! all that is old is new again
RBA will be raising by 0.75 next month I reckon.
BBSW pricing in 50bps in July and 25bps in August, but that might change after the next Fed call.
Yep go hard and fast. There will be some collateral damage but best to bring forward some of that. Either way a got a semi
Nice puff piece on the Genworthless CEO. She wants to find innovative ways for peeps (because people are so important and they are just people after all, @harry) to access moar debt!
https://www.afr.com/work-and-careers/leaders/meet-the-ceo-hell-bent-on-helping-people-into-the-housing-market-20220616-p5au64
If bcnich’s white powder-coated calls are even 20% accurate, then the last thing on her mind is going to innovation. All those people on 10% deposit purchases had to stump up for mortgage insurance, and once you know how that little rort works you’ll see Genworth is the canary in the coalmine.
I cannot wait tbh 🙂
Ah yes, good old debt. It is just like beer: there is nothing that it cannot make better.
Innovative desperation is the technical term
WA is looking like a winner…
I disagree.
It’s been in decline for the past decade and made a small jump during COVID compared to every other market (what about half the % increase as over East?) despite being the biggest beneficiary of the latest commodity price cycle. Why would it outperform now.
Isn’t that why WA would outperform now? May not go up but it has less reason to fall compared to Sydney and Melbourne.
I would attribute that to a combination of low gas prices and exemplary treatment of female FIFO workers.
Even though I think property is long overdue a correction, I’m happy to play devil’s advocate here:
– property prices falling 30% will only wipe out the previous year’s growth, bad news for people who bought their first home in 2020/21 but they only make up a small % of market
– household balance sheets are very strong, savings rates are high and offset account deposits are materially higher than when we entered the pandemic, ie there is plenty of buffer to eat into….for now
Gotta remember that maths: a 30% fall wipes out a 43% gain.
@Josh 43% was it? couldn’t remember the exact increase
That was just the rise that would be cancelled out by a 30% drop. Just illustrating that falls cancel out more than the equivalent rise.
A little remembered point on the drop v the rise, along with the marginal seller will start the ball rolling on the way down …….
The problem is the productive parts of the economy are stressed, ie construction, so a downturn there feeds into the service economy. And what happens when falling house prices result in buyers needing to put in extra money to meet settlement when banks reduce their valuations? All hell breaks loose. There is only a narrow window of price falls that can be absorbed until procyclical forces start rampaging.
I can’t see how construction is a productive industry. Building a factory maybe, but housing? It’s really a service industry and part of the FIRE economy.
Correct.
From start to finish, in the gfc in u.s. only 11% mortgagees actually defaulted. 11% over a few years caused a lot of damage to everyone else.
There’s the link, “Defaults rose to a peak of more than 11 percent of all mortgages in 2010.”
https://www.mckinsey.com/~/media/McKinsey/Industries/Financial Services/Our Insights/A decade after the global financial crisis What has and hasnt changed/MGI-Briefing-A-decade-after-the-global-financial-crisis-What-has-and-hasnt-changed.ashx
Now compare to all mortgagees over 6x DTI here now.. “The share of new high debt-to-income ratio (DTI≥6) mortgage lending increased significantly to 24 per cent in the December quarter of 2021”
https://www.rba.gov.au/publications/fsr/2022/apr/box-b-how-risky-is-high-dti-and-high-lvr-lending.html
24.. thats double that what screwed u.s. around in GFC. The averages hide the true impact of a small number. Don’t underestimate them – even those small amount of irresponsible borrowers will fk you for a decade. As it stands we are twice that.. usually that impact compounds, not just “double the impact!”, at some point it becomes “times squared the impact”
Divya – it wasnt the the high levels of DTI that imploded the housing market, it wasnt even the reseting of mortgage to higher rates (most people could afford the loans at the time of reset), the reason the housing market imploded was because of VALUATIONS.
As soon as the value of the home was worth less than the max LVR, it was in default and the banks foreclosed on thousands of people that could continue to meet their loan repayments. They didnt care if you didnt miss a repayment, they said either kick in $50k to restore the LVR, or we sell the home from under you.
yeah so basically you are just looking the LVR stat in the same document.. 6% over 90 LVR.. imagine what %% is over 80% that are risky enough for banks to demand LMI? it aint less than 11%. And 24% are on high DTI as well. These are numbers to be sneezed at even with the parallels as we have already seen before.
DTI 6+ are likely to have paid mortgage insurance, which protects the banks not the borrower. Hence, Genworth is initially in real trouble in a scenario of oversized foreclosure numbers. And then it’s the borrower in trouble, because I’m willing to bet that very few people read the clause for LMI contracts that effectively states “once we have paid the bank the difference between asset sale proceeds and the debt owed, we are coming after you for reclamation”.
Yes, its the flow on effect. All of a sudden someone with 50% equity / LVR can be in default because the bank can randomly revalue your home significantly lower in a crashing house market.
However, I think they have learnt from their mistakes. They now know this causes a death spiral.
Be interesting to see what the banks will do in this type of environment (a) collude together as one to save themselves as a group, or (b) save their own skin and try to minimise losses
The later.
Good of individual > good of group. Evolutionary tried and tested for billions of years.
Fortunately they don’t tend to revalue. Im sure there are still some US properties valued at 2006 prices and kept off the market. Like most of Detroit.
@JJF, agree they don’t revalue on the fly, so those on variable rates are OK as long as they keep paying. But it will already be feeding into VaR calcs, which will impinge on lending capacity, and anyone on a refinance (even with the same bank) will likely trigger a formal valuation, which is when 80%+ LVRs might get a bit tricky. As always its the problems on the periphery that set the perceptions and pollute the system. I’m not a crashnik, but I do think it is going to get a bit messy for a while.
@RoboS rubbish otherwise there would be no social behaviours.
@JohnR when things are calm and orderly, sure.
You ever watched a riot on TV? Famine? Major disaster? When the rubber meets the road, everyone looks out for numero uno.
You might struggle to find anthropologists who agree.
The mellow and meek quiet Australian wouldn’t entertain banks taking liberty with people’s homes, regardless of what the term sheet says. If there is a small % in default, the banks will be ruthless. If there are large numbers in default, Gov and RBA intervene with a bailout.
Also, under APRA rules banks take liability for valuating correctly. If they have miscalculated the valuation, they are on the hook as much as the borrower.
Collateral Obligations – the thread should read up on these before saying collapsing valuations will destroy borrowers. Banks are on the hook for their LVR valuations. If it goes down beyond the terms of the bank valuation, it would easily be argued that’s the banks problem, not the borrowers.
https://www.apra.gov.au/sites/default/files/Prudential%20Standard%20APS%20220%20Credit%20Risk%20Management.pdf
Collateral and guarantees
46. An ADI must have prudent credit risk policies covering the acceptability of
various forms of collateral, appropriate processes for the valuation of such
collateral (including the valuation of collateral prior to entering into an exposure
and the ongoing valuation of collateral, where appropriate), and an appropriate
process to ensure that collateral is, and continues to be, enforceable and realisable
(refer to Attachment A to this Prudential Standard).
47. An ADI must ensure all valuations are appraised independently from the ADI’s
credit origination, credit assessment and approval process.
The valuation of collateral must reflect fair values, taking into account prevailing
market conditions such as time taken for the liquidation or realisation of
collateral.
49. An ADI must also ensure that the valuation of collateral such as land takes into
account, to the extent possible, the likelihood of external events, including but not
limited to fire, drought and flood, which may impact the valuation of the asset
taken as collateral.
50. An ADI must have appropriate mechanisms in place for regularly assessing the
value of collateral, guarantees and other risk mitigants.
51. An ADI must establish appropriate limits on LVR to minimise the risk that a
property serving as collateral will be insufficient to cover any repayment shortfall.
An ADI must ensure there is appropriate scrutiny of any instances of lending with
high LVR.
52. An ADI must appropriately evaluate the level of coverage being provided in
relation to the credit quality of the guarantor and legal enforceability of the
guarantee. For exposures to individuals in particular, an ADI must ensure a
guarantor has a clear understanding of the risks involved.
Why are we going back to zero? A fools game if ever there was one. Rates higher for longer is here to stay.
Because they are predicting future based on past behaviours. However we may be at the end game, ie great reset or revolution. Ultimately the elites take over or the people take back the power.
Maybe our elites are replaced by another Country’s elites? That is a consistent pattern in History.
How about if you compare with all the times that they were not replaced by foreign elites? Henry Ford had a point.
Global conditions are not favourable towards a great reset. If they reset now everything will collapse instantly.
Reset is an admission of abject failure and there would be dire consequences…. usually… but if *everyone* concedes then that can be avoided. But there are major dissenters at the moment that need to be brought into heel, or collapsed first.
Will be actual blood shed if people are to take back power ……. and a lotta hardship. Dunno if we have it in us …… all
So what !?
Markets go up and down
I have never seen a chart that was a straight line
“ A revolution gets its name by always coming back around in your face.” – Under Siege 1992