Sydney house prices are in freefall

CoreLogic’s 5-City dwelling value results for June are out with values across the major capitals falling for the second consecutive month by 0.9%. It was the sharpest monthly price decline since February 2019:

Australian monthly house price change

Second consecutive monthly house price fall.

The losses were driven by Sydney and Melbourne, where values plunged by 1.6% and 1.1% respectively over the month. By contrast, value gains were recorded across the other major capital cities:

June 2022 house price changes

Big price falls for Sydney and Melbourne.

Over the June quarter, values across the five major capitals also declined by 0.9%. Again, this was driven by sharp falls across Sydney (-2.8%) and Melbourne (-1.8%), whereas solid growth was recorded across the other major capitals:

June quarter house price change

Sydney and Melbourne push house prices into negative.

Sydney’s dwelling values have now fallen 3.2% from their mid-February daily index peak, whereas Melbourne’s are 2.0% below their peak.

Dwelling values rose by just 0.5% across the major capitals over the first half of 2022. However, there was massive variance across the capitals, with Sydney and Melbourne recording price falls, Brisbane and Adelaide recording strong growth, and Perth recording solid growth:

Year to Date house price change

Two-speed market.

Obviously, the 0.75% of interest rate rises since May have knocked the stuffing out of our two biggest (and most expensive) city housing markets. Sydney’s in particular has entered freefall after the initial May 0.25% rate hike:

Sydney dwelling values

Sydney dwelling values in freefall.

As the Reserve Bank hikes interest rates, losses will likely accelerate across Sydney and Melbourne as well as spread to the other markets.

Australia’s property market has entered full bear mode.

Unconventional Economist
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  1. The big question in my mind is whether we see an actual crash play out to its eventual conclusion according to natural market and social dynamics, or whether the gummint panics and we see some unnatural acts designed to kick the can down the road some more.

    I wouldn’t be at all surprised to see the latter case eventuate.

    • I reckon it all depends on how aggressively the RBA hikes rates. If the cash rate goes to 2.5% (economists’ forecast), we’ll get a solid bust (circa 15-20%). But if the futures market’s forecast comes true, it will be truly nasty.

      I can’t see the cash rate going above 1.75%. But we’ll wait and see.

      • Didn’t it go up by 40%? No one cared about that but now rates are going up everyone is crying.
        Can MB do an actual article on what % will be affected? For eg, 30% of oldies own outright/ not effected in fact will start to get interest on savings, 30% rent so will be cheering on crash plus getting interest on savings, 30 % with mortgage but lots have nothing left on mortgage or bought way back and can afford a 50 to 60 %drop. That would be good data rather than say everyone is f*d. And you can’t say no one seen it coming for Christ sakes, we have been on ultra low rates since the GFC. EVERYONE that signed a mortgage knew rates would go up eventually.

        • +1

          Universally cheered on the way up. Cheered on the way down, just by different people. Don’t we all deserve a moment of happiness?

        • @AvidCommentator deals with this and it’s not huge – certainly not as many as are affected by high inflation which is everybody.

        • It’s not about lower house prices affecting people though, it is about the growth of the monetary supply. Without that a depression is on its way and 100% of people will be affected by that.

          People think central banks are scared of inflation. Well, wait till you see who scared of deflation they are. It’s much more.

      • I can’t see it going too far either, but that don’t mean they will stop early. Whatever they stop at will be less than what the market says, but only because they have already gone too far and the whole thing falls into a heap.

        I think fair to say, if it weren’t for inflation, similar circumstances and they would have been cutting already. Right?

      • Goldstandard1MEMBER

        A solid bust mate would be going WELL through the gains of a mere 18 months which was built on the promise of low rates forever. Expect 30% for a solid bust beginning.

    • Our government doesn’t actually have a choice either it kicks the can, or it gets its can kicked.
      The hollowing out of our economy is simply that extreme, if we eliminate the RE parasitic industries then we’ll disseminate employment and guarantee that the whole economy follows RE into freefall.
      It is honestly that serious.

      • Yes.

        Over the decades we have seen a reduction in the real physical economy in Australia. Fewer people now do real physical jobs that are clearly worthwhile, and most people do byte-pushing jobs that appear to be useless. Let’s call that the BS economy.

        In my opinion it would be good to see this reverse.

        if we eliminate the RE parasitic industries then we’ll disseminate employment and guarantee that the whole economy follows RE into freefall

        You make it sound bad. I want the BS economy to shrink, crash, be destroyed, freefall and the worthwhile economy to grow, boom, increase, etc.

        What are you worried about?

  2. pfh007.comMEMBER

    It is good to see that housing asset prices are starting moderate with so little effort by the RBA.

    A few more gentle nudges and we might make some good progress.

    Now before all those with a bad case of Stockholm Syndrome about private bank credit creation freak out and accuse me of bringing pestilence to the planet caused by a reduction in private bank credit creation, let me be clear.

    As liquidity in the form of bank credit contracts there needs to be some substitute liquidity to support economic activity (and by that I mean the rest of the economy beyond the FIRE sector).

    And that is why ending the private bank monopoly on reserve accounts at the RBA is so important. The monopoly is designed to ensure that there is no competition to the liquidity provided by private bank deposit accounts.

    RBA reserve accounts available to all is the perfect way to create a 100% safe and liquid core of the monetary system that does not depend on interest.

    And yes most people will probably want to invest most of their savings rather than save them at 0% but once there is a 100% safe 0% core of the monetary system we can remove the daft public guarantee of unsecured investments in the private banks. Let people transfer their 0% earning savings to someone for some risk and return. Perhaps they will choose a bank but more likely they will choose some other, more competent investment manager or buy some shares or make their own loans direct to a borrower.

    So if you think there is NO alternative to giving the private bank cartel what it wants and jumping when they say jump….think again.

    Fixing the problem requires nothing more than requiring the RBA to allow every Australian and non bank access to a reserve account at the RBA.

    And the bonus for Albo is that there will be a one off opportunity to spend until the RBA source of liquidity is built up.

    That RBA balance sheet needs to grow as the balance sheets (credit creation by the banks) shrinks.

  3. ErmingtonPlumbingMEMBER

    I’ve been having lots of fun saying to people things like,
    “Some Economists are predicting a 50%+ house price drop”
    “That’ll have Ermo house prices well below a million bucks,… maybe even below 600k average!”
    It causes much consternation Amongst my friends, family and customers.
    I sometimes worry that I’m not a very nice person

  4. TailorTrashMEMBER

    Sydney down 2.8 % in a month
    Reverse those numbers to 8.2 % and it will be getting somewhere

  5. Fortunately Sydney has a long list of reasons why house prices were high. Like….ya know, all the amazing international businesses that have giant manufacturing and admin HQd in Sydney like um…………………wait. What is Sydneys reason to exist?

  6. Anybody who has been dealing with reality over the past 20 years has seen what’s been happening. Just because some of us declined to drink the cool-aid and pay laughable prices for crap does not mean we now need to feel sorry for those who didn’t have the common sense/ strength of character to say…”you know what? I just don’t feel like paying some clown what they overpaid for, plus some more for them so they can make a profit…just because…you know that’s what you should do.” It’s utter BS.

    The number of people who have overpaid and are now going to suffer house price declines pales into insignificance when compared to the number of today’s young and future generations who will not have to face a life of slavery just to buy a place to live.

  7. gballardMEMBER

    And we now have pollies offering to assist people to hop on the property ladder with only 2% deposit! The problem is that they are not aware that it is the top rung of the ladder!!. Much angst to come but that is for another day.

  8. I spent over a decade screaming “bubble” and “crash” all the way up. Capitulated in 2017. Now that it’s turning, I’m screaming “no crash”. Sounds like I’m cursed but not really. I bought with cash in Tassy before prices went nuts. It’s doubled in “value” since then but it’d be fine if it halved again. It should, I just don’t think it will.