CoreLogic’s latest Mapping the Market report showed that dwelling values declined across 41.9% of Australia’s 3,085 house and unit sub-markets over the June quarter, up significantly from the 23.6% of markets that registered price declines over over the March quarter.
New data from PropTrack is even worse, showing that more than half the nation experienced dwelling value declines over the June quarter.
Suburb-level analysis compiled by PropTrack for The Weekend Australian shows more than 50 per cent of the country is now experiencing declines in property values across both houses and units, hitting inner-city Sydney, Melbourne and Canberra…
“People weren’t expecting interest rates to increase for a number of years [PropTrack director of economic research Cameron Kusher said]…
“Interest rates have increased 1.25 per cent in three months. That means people can’t borrow as much as they could. And if rates go to 2.5 per cent, as expected, that’s going to dramatically reduce people’s ability to pay the prices people are seeking in those markets.”
Both sets of data are only current to 30 June. Therefore, they only capture 0.75% of interest rate hikes by the Reserve Bank of Australia (RBA) in May and June. They do not capture the 0.5% rate hike delivered by the RBA in early July, which has driven the cash rate to 1.35%.
The impact on the housing market has been dramatic, with CoreLogic reporting heavy price falls across Sydney and Melbourne over July, alongside solid falls across Brisbane (including the Gold Coast):
House prices across Sydney, Melbourne and Brisbane are now falling.
In fact, values have now fallen by 2.4% across the five major capitals, driven by Sydney (-4.8%) and Melbourne (-3.0%), with Brisbane (-0.8%) joining the correction over the past month:
House price falls accelerated after the RBA began hiking interest rates.
With Westpac, ANZ and the futures market all forecasting a cash rate above 3% by year’s end, implying an average discount variable mortgage rate of around 6.5%, house price falls are certain to both accelerate and spread across the entire nation.
What began in Sydney and Melbourne will soon become a national house price collapse if the RBA hikes as aggressively as the rate hawks forecast.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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