Saturday, October 1

Australia house prices suffer sharpest fall in 40 years – CoreLogic


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SYDNEY — Australian home prices took their biggest spill in 40 years in August as rising interest rates and cost-of-living pressures blew a hole in demand, threatening to undermine household wealth and confidence.

Figures from property consultant CoreLogic out on Thursday showed prices nationally sank 1.6% in July from June, when they fell 1.3%. It was the largest monthly drop since 1983 and dragged annual price growth down to 4.7%, compared to a peak above 21% late last year.

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Sydney again led the retreat with values ​​diving 2.3% in August and 2.5% from a year earlier, a world away from the 25% gains enjoyed over a bumper 2021.

The malaise also spread to other major cities, with Melbourne down 1.2%, Brisbane 1.8% and Canberra 1.7%. Overall, prices in the capital cities fell 1.6% in August, to be down 3.8% for the year.

Even the regions started to falter as prices fell 1.5%, ending a pandemic-driven bull run as people shifted to country living and greater space.

CoreLogic’s research director Tim Lawless noted home prices were still comfortably above pre-pandemic levels, but that this equity buffer looked likely to be squeezed further.

“It’s hard to see housing prices stabilizing until interest rates find a ceiling and consumer sentiment starts to improve,” said Lawless.

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“From current levels, interest rates are likely to increase by at least another 75 basis points and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values.”

The Reserve Bank of Australia (RBA) has already lifted rates by 175 basis points since May and is considered certain to hike again next week in an effort to contain surging inflation.

Markets are wagering the current 1.85% cash rate could near 4.0% by the middle of next year. Banks have sharply raised borrowing costs on new fixed-rate mortgages and tightened lending standards.

A sustained drop in prices would be a blow to consumer wealth given the notional value of Australia’s 10.8 million homes was estimated at A$10.2 trillion ($7.01 trillion).

($1 = 1.4556 Australian dollars) (Reporting by Wayne Cole; Editing by Ana Nicolaci da Costa)



financialpost.com