Home News Australia Housing Bust Spreads, Accelerates. Prices in Sydney & Melbourne Fall Below Year-Ago Levels, Sales Plunge

Australia Housing Bust Spreads, Accelerates. Prices in Sydney & Melbourne Fall Below Year-Ago Levels, Sales Plunge

by admin
0 comment

largest monthly drop in nDomestic house price index since 1983.

To wolf richter for wolf street.

Home prices in Sydney and Melbourne, one of the world’s brightest housing bubbles, hit 6.1% inflation in the second quarter and are expected to rise further in the third quarter, with the Reserve Bank of Australia downing 175% since May. After a basis point rate hike, it’s crashing. , still a meager 1.85%, including 50 basis points in August. And let’s see what the housing is doing. Not only has it failed as a much-touted hedge against inflation, it’s run amok.

In Sydney, house prices plunged 2.3% in July-August, and have fallen 5.9% over the past three months. core logicThe house price index has fallen 7.4% since its peak in January.

And surprisingly, house prices have fallen 2.5% since last August. I mean, what kind of horror show is this?

In Melbourne, the Home Value Index is down 1.2% month-on-month, down 3.8% over the past three months, down 4.6% from its peak in February, and a surprising 2.1% since August last year.

Nationally, the CoreLogic Home Value Index fell 1.6% in August from July, its biggest monthly decline since 1983.

This graph shows the price change by 3 months for 5 major cities (via graph core logic):

“Until interest rates hit the cap and consumer sentiment begins to improve, it will be difficult for home prices to stabilize,” said CoreLogic.

On a monthly basis, house prices fell in seven of the eight capital cities. Only Darwin clung with benefit.

In the three-month period, declines were recorded in five capitals, including Brisbane, which joined the club in August.

“Brisbane’s housing market peaked just two months ago after recording a 42.7% increase. [since the beginning of the pandemic]”Over the past two months, the market has rebounded sharply, falling 1.8% in August after falling 0.8% in July,” said CoreLogic.

Home prices, August 2022

mother

Three months

year-on-year

Median, AUD

sydney

-2.3%

-5.9%

-2.5%

1,066,493

melbourne

-1.2%

-3.8%

-2.1%

782,053

brisbane

-1.8%

-2.5%

17.5%

762,284

Adelaide

-0.1%

1.6%

21.8%

652,959

Perth

-0.2%

0.4%

4.9%

561,781

Darwin

0.9%

2.3%

6.3%

512,531

Canberra

-1.7%

-2.6%

7.8%

909,748

Hobart

-1.5%

-3.3%

5.8%

714,370

Sales plummeted.

In Sydney, sales plunged 35% in the three months to August compared to the same period last year. CoreLogic estimates that Canberra saw sales plunge by 19% and Melbourne by 16%. Across Australia, sales were down 15%.

Entering the normally busy spring and summer season, “we expect lower purchasing activity as rising interest rates and low sentiment continue to weigh on demand. The end result is an accumulation of advertised supplies that can further squeeze value.

lots of inventory all of a sudden.

“Sydney and Melbourne, where housing markets are more depressed, have already seen ad inventory rise above average levels, and it is quite possible that other cities will follow suit as the listing rises into the spring. Demand continues to taper,” said CoreLogic.

Across the eight capitals, the number of homes for sale increased by 11% from a year ago. New listings in the capital city over the last 28 days are well above the last three years, but down from 2018 (chart by CoreLogic).

But don’t panic yet.

The drop comes after a ridiculous price rally triggered by the RBA’s QE and interest rate restraint. Prices have surged from the beginning of Covid to their respective peaks earlier this year, according to CoreLogic data.

  1. Adelaide +45%
  2. Brisbane +43%
  3. Hobart +38%
  4. Canberra +38%
  5. Darwin +31%
  6. Sydney +28%
  7. Perth +26%
  8. Melbourne +17%

House prices are down year-on-year in Sydney and Melbourne. However, in terms of negative wealth, most homeowners in these two markets who purchased before August last year and most homeowners in other markets who purchased before 2022 saw significant price increases. home equity is still positive given that

Across the eight capitals, “a 15% peak-to-trough decline would bring the CoreLogic Composite Capital Index back to March 2021 levels,” CoreLogic said.

In addition, the buyer pays a down payment and pays the principal with a mortgage payment, further increasing their wealth. Also, “the risk of broad-based negative equities remains low,” he said, CoreLogic.

No big deal. If house prices drop, magically he stops at 15%.

not everyone is so optimistic.

Shane Oliver, chief economist at AMP Capital, a global investment manager headquartered in Sydney, said: ABC News This recession may be the end of a 25-year housing boom.

“Home price declines over the past 25 years have been mostly mild, with price declines of less than 10%, short durations, and prices quickly rebounding to new record highs as interest rates plunge to new lows. did,” he said.

“This cycle is different in that it is more severe and takes longer to recover, thanks to a combination of higher household debt levels, higher house prices relative to income levels, and the end of the long-term downward trend in interest rates. It’s possible,” he said.

If the RBA were to raise its policy rate to 4%, as financial markets predict, “this would more than double household interest payments, push mortgage payments to record highs relative to income, “It’s likely to drop about 30%,” he said. at the price. But OK, it sure was fun while it lasted.

Enjoy reading WOLF STREET and want to support it? I understand why you use an ad blocker, but would you like to support the site? You can donate. I am extremely grateful. Click Beer and Iced Tea mugs to find out how.

Will I be notified by email when WOLF STREET publishes new articles? SIGN UP HERE.

You may also like