RBA crashes Sydney house prices

CoreLogic’s daily dwelling values index, which measures price changes across Australia’s five major capital cities, fell another 0.22% in the week ended 5 August – the 13th consecutive weekly decline:

CoreLogic weekly price movements

Thirteenth straight loss.

Once again, the fall in dwelling values was driven by Sydney (-0.29%), Melbourne (-0.34%) and Brisbane (-0.14%), whereas Adelaide (+0.12%) and Perth (+0.07%) recorded rises:

CoreLogic weekly price movements

The ‘big 3’ continue to drive price falls.

It has been roughly one quarter since the Reserve Bank of Australia (RBA) first hiked the official cash rate (OCR) by 0.25% on 3 May. Since then, dwelling values at the 5-city aggregate level have plunged by 2.8%, driven entirely by heavy falls across Sydney (-4.8%) and Melbourne (-3.4%):

The next chart plots the time series of price movements across Sydney, Melbourne, Brisbane and the 5-city aggregate since the beginning of the year, alongside their declines from peak as at 4 August:

Declines from peak

Sydney and Melbourne lead declines from peak.

Sydney’s dwelling values have fallen 5.4% from their mid-February peak, Melbourne’s are down 3.6%, and 5-city aggregate values have fallen 2.9%. Losses across each market accelerated after the RBA’s first rate hike.

Brisbane was late to the party and only began falling in late June. Nevertheless, dwelling values are down 1.1% from peak.

With the RBA hiking interest rates four times over the past quarter, by a cumulative 1.75%, it is inevitable that dwelling values will continue to fall, led by Sydney and Melbourne.

Already borrowing capacity has been reduced by 23% because of these hikes, and soon price falls will spread across the other capital cities and the regions.

Ultimately, the magnitude of Australia’s house price bust will depend on how aggressively the RBA hike rates. Will it follow ANZ’s, Westpac’s and the financial market’s forecasts and hike the OCR above 3%? Or will it take a more measured approach?

Only time will tell. Pass the popcorn.

Unconventional Economist
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Comments

  1. Markets are desperate for free money to return.

    But what is deliberately misunderstood is what central banks in the US and UK are making crystal clear – Rates will rise and economic conditions will deteriorate simultaneously, for some time to come.

    In Oz, conniptions are being had and we’re still below Wayne Swann’s emergency low rate settings after the GFC.

    So listen up and listen good. Ludicrously overpriced assets like Oz houses are going to collapse in value. They will destroy the specufestor-smug middle class. This is now policy. Because the game cannot go on any longer.

    When it’s a choice between saving the banks (and capitalism by extension), or Mr & Mrs Muppet-mortgage-holder. Guess who’ll win?

    Sell while you still can.

  2. The fed broke it. Now, they own it.

    Please extend your chart to Jan 2020 and include Perth. It will then be possible to see the relative performance of each city. You can not have a crash without a boom with Perth dipping 5% during covid and has since gone up 10% for a net gain of 5% or -5% if taking inflation into account.

    • TailorTrashMEMBER

      Yes indeed . It’s not the desire to have a place of your own that is necessarily the problem . It is the greedy desire to have a portfolio of others homes and the stupid decision to open our childrens homes to the red motherland all fuelled by silly misdirected cheap debt that has caused this problem . A good correction that burns the parasite investors and the red hoarders can’t be a bad thing .

  3. Quantitative FleecingMEMBER

    Bank of England, yesterday – inflation to reach 13%, stagflation for all of next year, we will lift rates to bring price stability, there is a severe energy price crisis coming.

    https://au.finance.yahoo.com/news/bank-of-england-interest-rate-hike-mpc-inflation-110404272.html

    An interesting statement from the BoE on the severity of the energy crisis coming there: In the worst two years of the 70s energy crisis (1974-76), the share of income going to utility bills increased 0.7%, in the last two years (2021-23) estimated to be 3.5%, five times as big, and that’s just the energy shock.

  4. reusachtigeMEMBER

    Thanks to youse blokes for your rates panic and cockatoo calls. I’m hoping this will help swing the government into action to protect all the good people who have done the right thing and invested in property!

  5. Not only how far interest rates go up, but how overpriced houses are to begin with. Perth is the glaring exception to the other major capitals. Its cheaper than hobart and 40pct of sydney. Wages second only to sydney.

  6. “Crashes Sydney Market” – really?
    Up 40% in the last 2 years, now down 5%, and that’s a crash?
    I know these headlines are ClickBait, but headlines like this also destroy your credibility at the same time.

    • Hill Billy 55MEMBER

      We know that the CoreLogic figures are time lagged by 2 months or so, so I’m thinking the little uptick in the Brisbane numbers this week are the shocked southerners taking their illgotten gains and plonking them on our lovely dream homes after the first signs of the downward sidewards movement back in May/June. There were a lot of southern number plates on Brisbane streets then. Fortunately not as much now.
      As said in the article, the marginal buyer is now down 23% on their borrowing capacity, so lets see how the numbers are tracking when the current sales hit the records in 8 to 13 weeks. Should be fun.

      • If CoreLogic do an index where they track movements on a “daily” basis, how can their figures be lagged by 2 months?
        You are probably correct, I just dont understand how they do a “daily index”, but the numbers are months behind?

        • Quantitative FleecingMEMBER

          I think it’s because of property settlement time. So a house that sold for $1 mil 2 months ago doesn’t get officially published until settlement today, similar house that sold today for $900k won’t get published until settled in 2 months time. So the numbers are updated daily, but they are 2 months behind what is actually happening

          • That’s very interesting – thank you.
            So, a more accurate description for simple people like me is “Corelogic Daily index based on settlement prices for property sold around 2 months ago”.

          • Yes it’s like stargazing, what you see happened light years ago. Those technical glitches that force the suspension of index reporting when prices start falling too rapidly actually happened months ago.

        • As per the blurb at bottom of the daily index page, numbers are gathered from state govt sources so assume in qld for example it would be settlement data out of office of fair trading (who handle re transactions) and stamps etc. So not finalised until after settlement, say 5 – 6 weeks , plus processing etc

  7. Goldstandard1MEMBER

    RBA crashes what it inflated. So what? I wxpect all gains of the last 18 months to be gone in less time.

    Remember, stairs up, elevator down.

  8. Jumping jack flash

    The great deleveraging has begun, but for what purpose?

    Are we all trying to keep up with China as they madly deleverage their 10 trillion total household debt?
    Are we all trying to become like Russia, with just 400 billion total household debt? Barely a drop in the ocean compared to the 16 trillion total US household debt, and just 1/80th the size of the 3.2 trillion total Australian household debt.

    Each dollar of that debt creates fake demand, and more demand is created as the debt expands. It is this demand created by the debt that keeps everyone employed, and our wages at the fantastic levels they are.

    And its not like our glorious leaders are planning on replacing the lost demand from all this debt not being created now, by building acres upon acres of productive factories for turning our abundant raw materials into useful finished goods to sell to the world for profit!

    At least the US is still talking about building semiconductor factories.
    Pelosi even flew over to Taiwan, for what I can only assume was to learn a bit about the semiconductor game. She was obviously there for a tour through a semiconductor factory to see how it was done. I mean, what else did she even do there?

    In comparison, Albo mentioned semiconductors once after returning from one of those “esteemed global leader” meetings he attended early on, where I’m sure they were discussing the expected global fallout from attempting to collapse China with sanctions (soon).
    But nary a peep about it since.

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