By Unconventional Economist in Australian Property
at 12:10 am on August 10, 2022 | 81 comments
Sydney’s house price crash is accelerating with dwelling values now down 5.9% from their peak and quarterly losses running at their fastest pace since 1983:
Sydney house prices fall at their fastest pace since 1983.
As clearly illustrated in the chart above, Sydney dwelling values began falling sharply following the Reserve Bank of Australia’s (RBA) first interest rate hike on 3 May. Since that first hike, Sydney dwelling values have plummeted an extraordinary 5.3% – well in excess of any other Australian market:
Sydney suffers heavy price falls after rate hikes.
Sydney’s price falls have been driven by the premium end of the market – i.e. the top 25% of homes by value – where values have fallen by around 9%:
The most expensive 25% of Sydney’s housing market has experienced the biggest price falls.
Economist predictions for how far the RBA will hike rates vary, ranging from a peak in the official cash rate (OCR) of around 2.6% (CBA, AMP and NAB) to a peak of 3.35% (ANZ, Westpac and the futures market).
This means that the OCR should rise another 0.75% to 1.50% depending on which forecast comes true, inferring a discount variable mortgage rate of between 5.95% and 6.70%.
Both scenarios would present a big lift in monthly mortgage repayments versus their level in April 2022 immediately before the RBA’s first rate hike.
As shown in the table below, mortgage repayments would rise by between 34% and 45%, representing a lift in monthly repayments of between $1,126 and $1,293 on a $750,000 mortgage:
Sydney mortgage holders facing a massive lift in repayments.
Sydney house prices would likely fall hard under either interest rate scenario, ranging from a steep correction (circa 15-20% fall peak-to-trough) to an outright crash (over 20% decline).
The market’s fate is in the hands of the RBA.
Australia’s house price crash continues to build
The Reserve Bank of Australia (RBA) is expected
New data released today by the Australian Bureau
CoreLogic has released a report examining
Yeah yeah yeah can we have that first graph goin back maybe 20 years?
Don’t be silly that will destroy the narrative.
It might help cool the Unconventional Economic Hysteria.
Yeah, the panic on all things around here is hilarious. This should be called “ChickenSh1tsEconomics”.
We’ll all be rooned said Van Onselon
Why does it only go to Jan 22?
Harry, Harry, Harry if your want to buy a house in Newtown but can’t afford it you shouldn’t be just hoping for a crash that’ll force someone else to just give theirs away!
You should just learn to code and get a better job.
He’s got a cute little Python thing goin’ on.
A carpet python?
JR thinks it’s “cute”! That says a lot.
A PJ python, also know as a Children’s Python.
MB has become a laughing stock. Provide the graph to 2019 at minimum for proper context.
Exactly. Let it crash and review recent loans for fraudulent or predatory lending practices.
Economist predictions for how far the RBA will hike rates vary, ranging from a peak in the official cash rate (OCR) of around 2.6% (CBA, AMP and NAB) to a peak of 3.35% (ANZ, Westpac and the futures market).
Do you honestly believe that when we reach these so called expert predictions of the RBA cash rate that they will pivot and start reducing rates again.
Give me a break.With inflation skyrocketing all over the world the only leaver to pull is higher interest rates.
If you don’t combat inflation with higher interest rates we will end up like Turkey or many other countries with an inflation rate in the 80% range.
These banks and governments are playing cribbage wanting us not to worry and continue to pile in on their Ponzi scheme when in reality this economy and many others around the world is heading for a depression.
We are already in a recession it’s only going to get nastier from here.
All the indicators are pointing that way.
Don’t be fooled by their lies.Phillip Lowe has already fooled you last year by saying rates won’t go up for another 3 years .How many people will be affected by this lie.I can tell you it will be millions of Australians.
If you don’t combat inflation with higher interest rates we will end up like Turkey or many other countries with an inflation rate in the 80% range.
What concerns me more is the equally likely case that despite raising interest rates we end up like Turkey….
We’re entering a recession like no recession we’ve ever seen before, sure excess money (liquidity) is always the cause of inflation but in this case I’m not convinced that taking the punch bowl away will have the desired effect.
Supply chains need to be rebuilt in a post Covid world, China’s strong positions in certain industries needs to be countered by re-investment by western companies. Simply crushing demand with the IR lever won’t leave us better off unless we (the west) somehow (fiscal policy maybe) rebuilds the make capabilities we spent the last 20 years out-sourcing to China .
Currently in Australia we are unable to obtain the antibiotic flagyl-it’s been around for decades and is cheap
There are issues with supply chains that persist.No one is talking about it nor is anything being done about it
Good point, it’s not just big screen TV’s that are in short supply it’s lots of essentials ranging from building materials to pharmaceuticals. Most important to remember is that we’ve lost the skills and training required to make these things. Our would be Engineers and Chemists became Bankers and Physiotherapists, the old guys that may still have the skills got told to F’off and drive an Uber, most aren’t interested in returning (fool me once shame on you…) .
I’m seeing this Engineering skills deficit every day, even our best young Engineers don’t have the real world experience of prior generations, they’re great at writing reports but suck at getting products to market, most of this comes down to a lack of industrial depth (who do you ask to help when something goes wrong …and on a major project something always goes wrong)
To me the whole globalisation thing never made sense. Destroying your own manufacturing capabilities just to make things cheaper and of lower quality. Rather dumb.
Within a neoliberal system we didn’t have any choice but to give up manufacturing. Ask modern politicians about Industrial Policy and they’ll either look back at you with blank stares or spew out Chicago school gibberish.
Unfortunately anyone wanting to rebuild manufacturing in Australia will have to overcome this hurdle, it hurts my brain just to think about attending another one of these pointless political meetings…why?? ( the hardest part is having the smug ba5tards lecture you on modern-day economics before they kick you to the curb)
The move to disposable products that once lasted years compounds the supply chain risks. The acceptance of low quality manufactured goods from China means greater reliance on supply chains functioning. I’m looking at you Ozito.
Same goes for every front loading washing machine on the market.
Their forecasts are all self interest hopium. Something will 100% break before the bank try a soft landing by resersing rates. Inflation won’t be tamed for 2 years.
they’ll raise it to nominal then around dec, start lowering for the house-horny.
“… inflation skyrocketing all over the world the only leaver to pull is higher interest rates.”
however, australia does run a mass immigration economic ponzi … the treacherous government as well as raising rates, could also remove much of the inflation by having a sustainable immigration program ie.50,000 nom a year.
“the only leaver to pull is higher interest rates” – this is not 100% true, they could encourage domestic production of essentials, increase investment in productivity etc NAH ! they will never do that, it takes some foresight to actually invest in anything other than houses and holes.
At any rate the AUD will collapse if they don’t keep rates in the same ballpark as the rest of the world, and then oh the outcry when the muppets cant buy the latest 75inch TV.
Yes but both suggestions in your comment directly means increasing cost for mortgages. That’s how you discourage the investment in Australia’s largest unproductive asset. So we are back to raising rates or raising taxes or something else that kills the ponzi anyway. How else do you discourage other than to hit them in the hip pocket. See china. That’s what is required without raising rates.
Compare Sydney dwelling pricing to that in the States of the United States … check brilliant graph …
Home prices are dropping throughout California. This Sacramento-area county is an exception … Ryan Lillis … The Sacramento Bee
Nothing beats the old sac.
What is happening with inflation?
Still going up ?
Unemployment? Still going down?
That must mean tighten fiscal and tighten monetary policy further.
House prices falling?
Yawn – that is just what happens when an economy is driven white hot by desperate Scotty and Josh.
Don’t panic have a cup of tea and a good lie down.
Cool like a cucumber 👍
If RBA don’t keep up with the Fed this will likely push the AUD lower yes?
100% yes. So you break credit fuelled housing or import inflation (as our goods will be more expensive to buy) via a crashing dollar. That is why it was so dumb to leverage up into cheap money as they have very limited levers to pull this time.
“The market’s fate is in the hands of the RBA.”
They helped create the mess in the first place.
Great conversation this one.
Thanks for posting
Saw that last night. I agree with the fossils and Lowe and Libs and all like them should be thrown off bridges like in the old days for damning more than a generation to struggle times. All this and climate change is still getting worse. We’ve literally sold our environment to consume more stuff.
Study some paleocimatology and you will quickly realise climate doom is just another globalist con job. We are in an ice age and CO2 drought from a geological and biological perspective.
“This means that the OCR should rise another 0.75% to 1.50% depending on which forecast comes true, inferring a discount variable mortgage rate of between 5.95% and 6.70%.”
That is some margin on costs there !!!
The market’s fate is in the hands of the Fed, and they give ZFs about over indebted Aussie punters.
PS: echoing Harry’s request to extend the timeline of the graph back to 2001 or thereabouts
The base date is 31/12/2009, so the value would have been 100 at that time.
That’s why they accuse blogs like this of being echo chambers
It was cheek in tongue.. 😉😉
Well played.
Unfortunately I’m still not seeing it in the Sydney and outskirt areas that I think are worth buying in. I feel the overbuilt areas are taking the heat (i.e. the house and land package areas), and the inner city where the desirable areas, especially if they were relatively “affordable” before are remaining strong.
Areas I think with long term potential have actually risen sadly. I’m not seeing any evidence of IR rises in sales figures at all yet. I think IR’s have to go up quite a bit more before people feel the effects.
The psychology has yet to be broken. Capitulation is some way off and so reflation is still possible.
Really one or two more reflations won’t make the final collapse much worse
People will wake up in Spring as people sell to lock some gains and buyers catch a falling knife. Capitulation is mid next year IMO
Not around here either, still 1.2m and limited stock, but this is definitely not the premium end of the market lol
Limited stock indeed. We were looking at something earlier in the year (Jan) and still regret not buying it. Prices seem to be higher now than back then for an equivalent property despite IR increases.
I think the “non-premium” end is the resilient end right now tbh.
Be patient. The housing market almost always falls/rises first in premium markets, then ripples out over a year. So your area is still being somewhat impacted by recent growth in 2021, but will soon be hit by the drops as they ripple out.
Be patient. The wave is coming.
I hope the drops start spreading to the mid price Melbourne suburbs…
This is just the turn, even though it’s really aggresive. People need to realise that this isn’t a dip before capitulation.
A friend asked me how the interest rate changes have affected us. I said I wasn’t sure, but hadn’t noticed any difference so went and checked.
I have 3 mortgages, 2 are fixed until 2024 and 2025 respectively. The third smaller loan hasn’t actually increased repayments yet. Next month will be an extra $60 a month on a 500k loan. It takes time for the interest rate changes to actually flow through to the mortgage holder.
I think current price drops reflect borrowers having reduced loans approved by banks rather than any increasing stock due to mortgage stress. That will take much longer to flow through the system.
This Spring will be absolute carnage. Will turn 10% into 20% falls quickly coming out of Christmas as the data comes out 3 months lagged.
That’s if people decide to sell. In the areas I’m looking at I don’t think this is the case. People will just “stay put”, given the area has some amenity even if it is relatively “affordable”. It just means they will delay their plans for an upgrade, etc. This is unfortunate for me, as I am evaluating whether to buy vs other asset classes.
Stock/listings have dried up but note that I deliberately limit myself to high lifestyle, limited development potential suburbs. Figured Australian’s pay for lifestyle – not for infrastructure, development, etc which given the last decade and the governments we have had are more negatives than positives.
Ah yes, illiquidity will be the savior of yet another asset bubble…. /s
Probably because mortgage rates are still at 3.2% which is a pittance, unless you have a very very large mortgage. Which is probably why the top end is being hit first. Might see some action at the bottom end of the market when mortgage rates hit 5-6%.
It’s all relative though.
The better house coming down in price affects the lesser house – because why would you buy the lesser one when you can get the better one for not much more?
Sydney house prices would likely fall hard under either interest rate scenario, ranging from a steep correction (circa 15-20% fall peak-to-trough) to an outright crash (over 20% decline).
40% up in thr pandemic and we won’t even go down by 20%..🥱🥱🥱
So if up 40% during pandemic, then 40% down will be back 2019 prices, then from there if down 30%-50% then that should be considered a crash!
I just went to RateCity to compare 30y variable rates for home loans and I can see the cheapest is about 3.10%, way below the 3.45% what it was in your table for Apr22. Surely there is something I am missing ?? as the rate went down so far!!
Wait wait wait.
Sydney Expensive, Mid, Cheap? Yeah-nah, mate. The scale is shared by the fire danger rating system, i.e., from highest to lowest it goes:
– Sydney Catastrophic
– Sydney Extreme
– Sydney Severe
That’s something we can all be comfortable with.
Sydney still up 0.2% over 12 month. Should go negative within a few days.
People’s high risk appetite and willingness to take on too much debt sends AUSTRALIA’S housing market into freefall.
There is NO chance of soft landing here. No gov support can help. Immigration won’t fill the void of no cheap credit and FOMO. It’s simple – people got addicted to cheap money via the promises of people in power who have no economic idea and now savings are drying up, then defaults, then potentially banks. My tip is Bendigo Bank first looking at the books.
Oh and people say “we havent even crossed to negative for 12 months yet”, the turn is on and I expect the gains of the 18 months to April 22 to be gone by March 23. The turn in momentum will be too much to turn IMO
Burn, baby, burn!
In Sydney inferno.
Exactly! A debt based ponzi scheme implodes when values decline, and values are determined by the availability of debt to the individual fool. Now that credit is restricted the tide comes in and people will find out if the remember how to swim. Debt is weight around your neck.
There are very limited swimmers due to being told they’d never need to learn. Always learn to swim, keep up the weights and go long cardio. Always.
Yeah but what worries me is that once the most vulnerable 10% have drowned our Politicians will take steps to save the next 30% from the same fate. How do you do that when you’re fighting against the turning tide?
As every beach goer knows swimming a against a rip is the easiest way to drown but it’s hard to not attempt to swim back to shore when you’re getting swept away by a rip, same goes for changing tides.
Correct Dodgy, and the economically weathered will use it to a advantage as the surfer looks for a rip, easy tansport out the back.
Australians (and Kiwis) will slowly realize that their house values are almost entirely based on how much cheap credit is available to consumers. It will be the destruction of the national religion — what will people believe in anymore, if not their houses doubling in price every 10 years???
Footy, VB/XXXX and The Australian Test team captain. Like they always used to do and should have done.
And it’s 7. You philistine.
A lot of second and third homes about to come back to market…
The overleveraged investor who keeps buying more properties with equity will be getting a tap on the shoulder telling them to liquidate.
Can’t wait for the Great Boomer Liquidation.
Are they though? I don’t think things are as clear cut as last time.
For one:
– There is a rental shortage. Rents will be able to absorb some of the increase depending of course on how far the IRs do rise.
– This doesn’t affect the whole market, it only affects suburbs with higher renters. Is this enough to tip the balance and spill to other suburbs? It could be, but it may not be.
– Unemployment and labor shortages are still persisting for the moment.
It all depends on if they raise IR’s enough to compensate for the above factors or not.
If IR’s aren’t raised aggressively I don’t think there would be enough “forced sellers” in investment areas (high rental proportion) to cascade to a general market downturn in quality stock which lets be honest is the stuff people want to buy and are waiting on the sidelines for.
I’m not predicting the future here; I just see too many variables to be confident in any outcome one way or another right now. Gas reservations could come sending inflation lower, conversely IRs might have to rise too much because of other countries, or immigration may suddenly bounce back, etc etc. Or we have another bushfire/flood/etc that causes ongoing supply issues.
The world is too “coupled” at the moment to take anything at totally face value especially when IR’s are the main factor which really are a derivative of everything above and more. Volatility is the new game.
I have a bad feeling that the government and the RBA will end up doing something very stupid once the economy starts to crumble. Let’s face it, they have had a lot of practice at it already. Speculator bailouts, bank bailouts and negative interest rates on the way, if they get inflation under control.
Had friends for lunch today whose house is at auction this Saturday. They were made a low offer ($200K below a recent sale of similar quality) which they have rejected. Will let you know what transpires. Almost gave the game away when he said “I’m not giving it away”. I did keep a straight face! Southern Brisbane.
That’s the RE agent subtly letting them know to have ‘realistic expectations’ at the FIRST auction.
Why is going down 5.3% extraordinary! When compared to prices up 30% since covid, it’s peanuts. It would be considered a crash if it was down 50%, past 4 x income which is considered the norm?
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