Monday marked exactly one year since Sydney dwelling values peaked, according to CoreLogic’s daily dwelling values index.
On 13 February 2022, CoreLogic’s Sydney dwelling values index peaked at 216.04, and as of Monday 13 February 2023, home prices had fallen 13.9% to an index value of 186.01:
Interestingly, Sydney home values have also begun to rise after falling swiftly since the Reserve Bank of Australia (RBA) commenced its monetary tightening cycle in early May 2022.
As illustrated above, Sydney values have risen 0.1% since Tuesday 7 February.
As a result, Sydney’s quarterly rate of decline has moderated sharply from -3.9% a week ago to -3.5% as of Monday:
That’s the slowest pace of decline since mid-July 2022.
In my opinion, this rebound in Sydney home values is a dead-cat bounce. It is “noise” rather than “signal”.
The reason is simple: the RBA has just increased the official cash rate (OCR) another 0.25% and has indicated that it will increase rates further in the months ahead.
Sydney is the nation’s most expensive housing market with the most indebted households. This means that Sydney home values should be the most sensitive to the RBA’s monetary tightening.
Indeed, values have fallen harder in Sydney than anywhere else.
Therefore, as long as the RBA continues to hike interest rates, Sydney home values should continue to fall.
And when the RBA inevitably changes track and begins cutting, Sydney values should rebound more strongly.
We have seen this in previous housing cycles where Sydney tends to lead the nation during both the boom-and-bust phases.
