TOL - 7th Feb, 2023
Aussie house price losses exceed 10%, Sydney losses breach 14%: 43 year record in sight
The great Aussie housing crash is about to best a 43 year record, almost certainly in the next month...
So it's official: as a result of the RBA's record interest rate hikes, the great Aussie housing crash has now racked-up a 10% cumulative price decline, just a touch below the all-time, 43 year record of circa 10.7% (between 2017 and 2019) based on data provided by CoreLogic through to 5 February 2023. (This analysis uses the 5 capital city index publicly reported by CoreLogic---one will get slightly different numbers using the 8 capital city index.)
The nation's largest city, Sydney, has suffered a cumulative loss that now exceeds 14%, also a shade below the biggest draw-down since the early 1980s, which was the 14.9% decline registered between 2017 and 2019 (technically, Sydney recorded a loss in excess of 20% in the early 1980s, although one would question the reliability of that data).
Losses in Brisbane have breached 10.8%---and are running at a 16% annual pace based on the last quarter of data---while Melbourne house price declines will soon pass 10% (they are currently sitting at 9.5% and counting).
Using the last 90 days of price changes to 5 February 2023, I have national house prices falling at a 12.2% annualised rate. Assuming the RBA hikes in both February and March, it is hard to see these unprecedented price falls attenuating in the next few months, especially considering that 1-in-4 Aussie home loans switch from fixed-rate to variable-rate in the next 12 months. These borrowers will suffer a huge increase in their mortgage rates from circa 2% to 6% pa.
In October 2021, we forecast a 15-25% peak-to-trough decline in national house prices exclusively as a function of the RBA's hiking cycle. It is likely that the lower bound of this forecast range will be penetrated in the next 5-6 months. I expect the national record for capital city losses to be trashed within the next month.
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Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha Managers” based on his risk-adjusted performance throughout his career across. He previously worked for Goldman Sachs in London and Sydney, the Reserve Bank of Australia, and founded the award‐winning research/investment group, Rismark. He has regularly advised governments, developing unique policy proposals. Chris graduated with the University Medal (Economics & Finance) from Sydney University. He studied in the PhD program at Cambridge University in 2002/03, leaving to set up his funds business.
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Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...
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Chris co-founded Coolabah in 2011, which today runs over $8 billion with a team of 40 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...
Expertise
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