CoreLogic has released its daily dwelling values results for January, with prices across Australia’s five largest capital cities falling another 1.1% over the month – the ninth consecutive monthly decline:
The declines in January were broad-based with all major capital city markets recording value falls:
Home values over the January quarter continued to fall fast, down 3.3% at the 5-city aggregate level. The overall decline was driven by the three largest markets, namely Brisbane (-4.4%), Sydney (-3.1%) and Melbourne (-3.9%):
Since the downturn began in May last year, after the Reserve Bank of Australia’s (RBA) first interest rate hike, values have fallen by 9.7% at the 5-city aggregate level, led by Sydney (-13.8%), Brisbane (-10.4%) and Melbourne (-9.3%):
Finally, as illustrated in the next chart, which plots the current home value decline against prior corrections at the 5-city aggregate level, this current episode is by far the steepest price fall on record:
By the end of February 2023, the current house price correction should also be the largest on record, beating the 2017-19 episode.
The reason for the sharp fall in Australian home values is obvious: the RBA’s ultra-aggressive interest rate hikes, which has seen the official cash rate soar 3.0% since May 2022.
Given the RBA is expected to lift rates further, beginning with another hike next week, Australian home values should continue to fall at a solid pace.
I am not tipping a turnaround until late this year after the RBA starts cutting rates to ward off recession.
