Sydney’s house price crash continues to worsen, with CoreLogic’s daily dwelling values index recording losses of 8.1% from the mid-February peak.
As illustrated in the next chart, the majority (7.6%) of those price falls have occurred since the Reserve Bank of Australia (RBA) first lifted interest rates on 3 May:
Massive Sydney house price falls following interest rate hikes.
Quarterly price falls have worsened to 6.2%, which is the largest quarterly decline since 1983:
The fastest quarterly rate of decline since 1983.
The next chart plots Sydney’s current 8.1% price decline (shown in black) against prior episodes, based on CoreLogic data:
Second fastest price decline on record.
Sydney’s current 8.1% housing correction has a long way to go before it matches the record 17.4% decline over 11 months in 1982-83, or the 14.9% decline over 22 months between 2017-19.
However, the current pace of decline (8.1% over seven months) is the second fastest on record. Moreover, the pace of decline has accelerated in response to the RBA’s aggressive rate hikes.
Given there is a two to three-month lag before rate hikes hit mortgage holders, and the RBA has flagged further rate increases, Sydney’s dwelling values are destined to fall much further.
Sydney has the most expensive homes in the nation with the most indebted households. Therefore, the city is the most sensitive to changes in interest rates.
The bottom won’t arrive until after the RBA stops increasing rates, which probably won’t happen until mid 2023.
By then, Sydney will likely have experienced its biggest housing bust on record, easily eclipsing 1982-83.
