Australian housing values finish the year on a low
It’s the greatest decline in housing values since the GFC
2 min
Australian housing values experienced their greatest falls in 2022 since the 2008 Global Financial Crisis, CoreLogic data released today reveals.
After the monthly rate of decline moderated through September and November, values dropped a further -1.1 percent in December to record a -5.3 percent drop over the calendar year. It’s the biggest drop since 2008, when values were down -6.4 percent. The falls were greatest in Sydney, where values fell by -12.1 percent, followed by Melbourne at -8.1 percent and Hobart at -6.9 percent. The ACT also recorded a decline in values of -3.3 percent, while in Brisbane it was -1.1 percent.
However, values increased in other capitals, with Adelaide seeing a rise of 10.1 percent. Gains were more modest in Darwin at 4.3 percent and Perth at 3.6 percent.
After steady growth at the start of 2022, the downturn in housing values closely aligned with eight consecutive interest rate rises announced by the RBA since May.
“Our daily index series saw national home values peak on May 7, shortly after the cash rate moved off emergency lows,” said Corelogic’s research director, Tim Lawless. “Since then, CoreLogic’s national index has fallen -8.2 percent, following a dramatic 28.9 percent rise in values through the upswing.”
Predictably, the most significant falls were at the highest end of the market.
“The more expensive end of the market tends to lead the cycles, both through the upswing and the downturn,” Mr Lawless said. “Importantly, recent months have seen some cities recording less of a performance gap between the broad value-based cohorts.
“Sydney is a good example, where upper quartile house values actually fell at a slower pace than values across the lower quartile and broad middle of the market through the final quarter of the year.”
Despite the downturn in many parts of the country, CoreLogic reports that housing values still remain 11.7 percent higher in the combined capitals and 32.2 percent higher in the combined regional areas than they were pre pandemic.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Amid looming rate rises, there are reasons to be cheerful as mortgage holders head into 2023
2 min
Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet tomorrow for the first time this year.
Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggests that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This would allow the RBA to step back from further rate rises for the next few months as it assesses the impact of tightening monetary policy on the economy.
The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.
Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.
Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.
“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said.
“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again.
“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”
Australian lenders hope no-interest cards can arrest a decline in usage and attract younger customers.
