The September CoreLogic dwelling values index registered another 1.8% decline for Sydney, which was the eight consecutive monthly fall in home values:
8th consecutive monthly dwelling value decline.
The quarterly pace of decline accelerated to 6.1%, which was the sharpest fall since March 1983:
Sharpest quarterly price decline since March 1983.
The next chart compares Sydney’s current price correction (shown in black) against prior episodes, using the CoreLogic monthly hedonic index.
Sydney’s current 9.0% decline has a long way to go before it reaches the depths of the 1982-83 bust (-17.4% over eleven months) or the 2017-19 correction (-14.9% over 23 months). However, the pace of decline is the second fastest on record at this stage of the downturn (eight months in):
Second fastest house price correction on record.
Moreover, unlike the 1982-83 bust, the current correction began slowly in February only to gather strength after the Reserve Bank of Australia (RBA) began lifting interest rates in early May.
Sydney’s 9.0% decline is leading the nation’s property correction. This makes sense given Sydney homes are the nation’s most expensive and the city’s households carry the largest mortgages. This has made Sydney the most sensitive to the aggressive interest rate hikes from the RBA.
The ‘good’ news is that the RBA looks to be coming to the end of its interest rate tightening cycle, which limits downside risks for Sydney house prices.
I expect the RBA to slash rates mid next year as the global economy enters recession and the domestic economy falters. Given Sydney’s sensitivity to interest rate changes, house prices will then be off to the races once again.
But not until the 1982-83 house price bust has been surpassed.
