Joye: Sydney house prices crashing at 22% annual pace

Coolabah Capital’s Chris Joye has provided an update at LiveWire, which shows that Sydney’s dwelling values are now crashing at a 22% annual pace, whereas Melbourne’s are crashing at a 15% pace.

These heavy falls coincide with the Reserve Bank of Australia’s (RBA) first 0.25% interest rate rise in early May, which was then followed with two consecutive ‘double’ 0.5% hikes in June and July, which took the official cash rate to 1.35%.

According to Joye:

Since it is clear the first RBA hike broke the Aussie housing market with a striking structural acceleration in house price declines (see grey shaded line in the chart below), I have added in a new line in the embedded table that displays the annual pace of house price losses since 4 May 2022 (ie, the day of the first RBA hike). Over this period, which is almost one quarter’s worth of data, Sydney house prices have been falling at a stunning 22.2% annual rate. Melbourne is not far behind with annualised losses of 15.4%. Across the five biggest capital cities, dwelling values are shrinking at a 13.1% annual rate.

Falls in Australian dwelling values

My second chart below shows the quarterly (or 3 monthly) annualised rate of house price growth across Sydney, Melbourne, and the 5 largest capital cities since October last year. What you can see is a very clear acceleration in the rate of Aussie house price falls: and there is no end yet in sight.

Annualised house price falls

With the RBA set to hike at least another 50 basis points in August, it will have imposed an unprecedented 175 basis points of hikes on borrowers since the start of May (or effectively over the last 3 months). This will only further exacerbate what will doubtless be the greatest Aussie housing crash in history, which we first forecast back in October 2021.

Over the past two weeks we have witnessed both ANZ and Westpac aggressively lift their interest rate forecasts. Both now tip Australia’s OCR to rise above 3% by year’s end, which is broadly in line with the futures market’s 3.35% OCR forecast by December.

If these forecasts come to fruition, it will see Australia’s average discount variable mortgage rate climb to around 6.7%, which is nearly double its level of 3.45% in April 2022.

Interest rate hikes of this magnitude would deliver the biggest house price crash in living memory and risks driving the economy into an unnecessary recession.

The RBA needs to take a cautious approach to rate hikes, not the lunatic “lift until something breaks” path that it seems hell bent on pursuing.

Unconventional Economist
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Comments

  1. So when the vybbrannts show up, it’ll go up 22% and all will be right in the world again. Why does he care?

  2. The chart looks like the second derivative is still negative which means the pace of falls is speeding up. Given the lag on these numbers (which is about a month?) annualised rate of decline is likely higher than 22% atm.

  3. Quantitative FleecingMEMBER

    Okay, but what is phatwolfie’s opinion on the Manly pride jersey saga? Why hasn’t MB published an article about the real issue at hand in Australia?
    “Lunatic Manly Players Explode Pride Jersey Landmine”
    “Phatwolfie predicts Manly membership 22% decline after pride jersey policy error”

    • I’m pretty sure the entire suburb of “Manly” needs to be cancelled for being sexist.

  4. Drops by 22% we are back to 2020, before idiotic govnuts thought covid was going to kill us all and did a massive pump, now comes the dump.
    Got to love markets.
    Economists are like psychologists, they know a lot of theory, but very little in practise or implementation. A dart board is often more accurate.

    • In society we can only have fear, fear of missing out, fear of paying to much, fear of IR return to the norm, fear that you should have more, no wonder, we have endemic levels of depression and anxiety in our society.

      • fear of bat flu. c)vid, un hexinated, exposed mouths, exposed nostrils, unsanitized hands, breath, breathing, clearing the throat, sneezing, stuffy nose, warm strangers in close proximity breathing organs exposed

  5. Arthur's Poodle

    Ah, isn’t that:
    Banks lending less to Punters!

    Oh no 🙈, won’t anyone think of the Ponzi economy! 🙈🙊🙉

    🦧

  6. Display NameMEMBER

    22% drop, needs a 28% increase to come back to the status quo. Would be a good start

  7. Hill Billy 55MEMBER

    Of course, what is ignored in the analysis is that the CoreLogic numbers are anywhere from 6 to 13 weeks delayed in reflecting real world prices. So this started well before the rate rise of May.
    Also CoreLogic show that the annual growth for both Brisbane and Adelaide over the past 12 months exceed the downdraft from Sydney. Really, the problems were evident on the way up. Why the shock and horror on the way down?

  8. Showing once again why Sydney’s soooooo much better than Melbourne. Even when it comes to losing (house values) Sydnet beats Melbourne hands down.

  9. happy valleyMEMBER

    Time for Captain Phil to do a Byers and exit early from his contract – the Cap[tain’s no cash rate increase until 2024 “furphy” (to be polite) deserves that he walks early. He’ll still get his top-shelf AC (Companion of the Order of Australia) for turning up for the last 40 years at the RBA sheltered workshop and there’s many a juicy non-executive director posting for him to grab and earn just as much annually part-time as he has been full-time.