In July’s “Great Housing Debate” against Coolabah Capital’s Chris Joye, Stephen Koukoulas (‘The Kouk’) forecast a peak-to-trough fall in Australian dwelling values of only 7% based on a forecast peak in the official cash rate (OCR) of 3.0%:
“Peak to trough is minus 7%… That assumes 300 basis points of rate hikes from the RBA… So a 7% decline…
“It will probably occur in the middle parts of 2023 to the latter part of 2023… In fact the reason for a 7% decline and not much more than that is obviously interest rates have some impact, not the dominant issue clearly”…
CoreLogic’s daily dwelling values index, which measures price declines across the five major capital city markets, has already fallen 7.0%, with national values likely down a little less:
So, with his 7.0% target about to be breached, The Kouk told Pete Wargent’s Property Pod that he now expects a peak-to-trough fall in dwelling values of about 10% nationally.
Specifically, The Kouk said that “with CoreLogic’s numbers, it’s now 6.5% approximately… We’re probably close to the end. Look, if I was to recast my forecast, I’d probably say minus 10% but that would be about it… There’s deceleration in the pace of decline… The pace of decline is only about 0.2% a week now… So that’s 0.8% per month…”
It is true that CoreLogic’s pace of decline has decelerated, although they are still falling at a fast pace relative to the record 2017-19 bust:
Quarterly losses at the five-city level are still dropping by 4%; although the pace of decline is clearly slowing:
Given the existing interest rate hikes are yet to fully work their way through the system, and the RBA is certain to lift rates further, The Kouk should probably add another 5% to his decline-from-peak forecast.
It will be fun watching how this all pans out over the next nine months. Pass the popcorn.
