TOL - 26th Aug, 2022
Aussie housing crash update: Prices collapse again in August
Sydney prices are on track for another, truly massive, circa 2% per month decline according to CoreLogic data. They fell 2.2% in July, the worst outcome in around 40 years, and have slumped another 1.7% in the first 25 days of August alone. Sydney housing has now lost more than 7% of its value since its recent peak.
Brisbane is also tanking, as we warned it would, overtaking Melbourne with a chunky 1.3% loss over the last 25 days. Melbourne home values have shrunk another 0.9% in the first few weeks of August. Since their recent peaks, Brisbane and Melbourne's dwelling values have fallen more than 2.5% and 4.3%, respectively.
Across Australia's 5 largest capital cities, the national index has fallen by a hefty 1.2% in August, and is off more than 4.0% from its recent highs. At this rate, Aussie capital city prices will have lost more than 7% by the end of the year.
Based on the last quarter of daily data, Sydney housing is crashing at a 19.2% annual rate. Nationally, dwelling values are shrinking at a stonking 12.1% annual pace.
That puts the market on track for the biggest correction in over 30 years (the record during this period is held by the 10-11% drawdown between 2017 and 2019).
Our October 2021 forecast remains unchanged. That is, after the RBA implements its first 100 basis points of rate hikes, which it has now done, national home values will fall 15-25%. This forecast range was quite explicitly designed to capture the RBA hiking rates by more than 100 basis points. Most banks have embraced this projection in recent months.
Using the RBA's own internal housing model, we have previously shown (see here) that if the central bank hikes to a very extreme, 4.25% cash rate, the RBA's research implies that Aussie house prices would have to decline by 30-40%. This is not our forecast, however.
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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...
Expertise
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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