Australia’s housing market is well and truly feeling the impact of the Reserve Bank of Australia’s (RBA) three consecutive rate hikes, with the CoreLogic daily dwelling values index plunging 0.45% in the week ended 14 July:
Biggest weekly fall in dwelling values since August 2016.
It was the biggest weekly decline in dwelling values across the five major capitals since August 2016.
Price falls have gone national with values declining across every major capital city market, and huge falls recorded across Sydney (-0.63%) and Melbourne (-0.48%):
Coast-to-coast price falls.
Quarterly value declines have steepened in Sydney (-3.5%) and Melbourne (-2.3%), which has dragged values down 1.6% at the 5-City level:
Sydney and Melbourne house prices falling fast.
Finally, the next chart shows how dwelling values across the five major capital cities began to fall sharply just days after the RBA commenced its rate hiking cycle in early May:
Dwelling values have fallen sharply in response to rising interest rates.
Values at the 5-city level have fallen 1.9%, led by heavy losses across Sydney (-3.5%) and Melbourne (-2.4%).
The AFR’s latest survey of 31 economists revealed a median forecast for the RBA official cash rate of 2.85%, meaning the rates would lift another 1.5% from their current level. In turn, this would drive the average discount variable mortgage rate to 6.2% – up a hefty 2.75% from its level in April immediately before the RBA’s first rate hike.
The RBA’s own modelling suggests “that a 200-basis-point increase in interest rates from current levels would lower real housing prices by around 15% over a two-year period”.
Therefore, if the economists’ interest rate forecast comes to fruition, then Australian housing is staring down the barrel of a peak-to-trough fall in real values of around 20%, with more expensive markets like Sydney and Melbourne leading the decline.
It would be the biggest house price correction in generations.
