Coolabah Capital’s Chris Joye notes “that the great Aussie housing crash is stabilising in the vanguard cities of Sydney and Melbourne”, albeit values nationally are still plummeting at a 16% annual pace (and 22% across Sydney).
However, the “bad news is that only a portion of the RBA’s 225 basis points of rate hikes have been passed on to borrowers, and there are likely more hikes to come”.
The below chart, tracking the quarterly decline in dwelling values across Sydney, Melbourne, Brisbane and the 5-city aggregate corroborates Joye’s view:
Is this as ‘bad’ as it gets?
Sydney continues to lead the bust with values falling by 6.2% quarter-on-quarter. However, the rate of decline has been stable for around two weeks.
The rate of quarterly decline across Melbourne’s (-3.8%) has eased a little over the past fortnight, however it has accelerated across Brisbane (-4.4%).
At the 5-City aggregate level, the rate of quarterly (currently -4.2%) is still quickening, but at a slightly slower pace. Part of this decline is also now being driven by Adelaide and Perth, whose values only recently began to decline.
The next chart shows that dwelling values at the 5-city aggregate level have fallen 5.6% from peak, led by Sydney (-8.9%), Melbourne (-5.6%) and Brisbane (-4.6%):
RBA rate hikes drive house prices down.
While not shown above, Adelaide (-0.6%) and Perth (-0.7%) dwelling values have also fallen from their peak.
How deep the downturn goes will depend on what the RBA does with interest rates. It’s latest monetary policy statement said that “the Board expects to increase interest rates further over the months ahead”.
If the RBA hikes as aggressively as the more hawking economists or the bond market forecast – i.e. to a peak cash rate of between 3.6% to 4.3% – then it will be an absolute bloodbath for house prices.
The pandemic price gains will likely be surrendered and then some. The bigger concern is what happens to the economy?
