The Australian housing market is currently undergoing a period of decline, as seen in the decrease of home values, auction results, and listings. The trend is expected to persist even after interest rates stop rising, as the lag between rate hikes and house price decline is often ignored. Despite this, there are signs of some momentum leaving the housing downturn, with auction activity increasing and the pace of decline slowing across most regions.
Tim Lawless, the Research Director of CoreLogic, notes that although the housing downturn remains geographically broad-based, there are indications of a reduction in the pace of decline across most regions. The national Home Value Index (HVI) fell by 1.0% in January, a slight improvement from the 1.1% decline in December, and the smallest month-on-month decline since June 2022. The quarterly trend in housing values is pointing towards a reduction in the pace of decline, but Lawless notes that national housing values are still falling rapidly at a rate of -1.0% over the month and -3.2% over the rolling quarter.
The combined capital city auction market is expected to almost double, with 1,352 homes set to go under the hammer this week, 90.4% higher than the previous week. Sydney is expected to host the most auctions, followed by Melbourne, while smaller auction capitals are poised to make up a larger portion of the capital city auction activity than normal.
Tarric Brooker and Andrew share their insights into the current state of the housing market and its impact on the country. Brooker expects some divergence in outcomes in Sydney and Melbourne, with a boost of 4% or more, but that has not happened yet. However, he believes that now is the best time for the new land tax change to boost the market due to low volumes. Andrew adds that lower listing volumes, based on hopes for better days, cannot remain below decade lows in the long term.
Christopher Joye, a portfolio manager at Coolabah Capital, predicts that the strong US employment data will encourage the Federal Reserve to raise interest rates to 5.25% and possibly beyond, increasing the risk of the Reserve Bank of Australia following suit. Joye forecasts that the lower bound of the 15-25% forecast correction could be an optimistic outcome, as the housing market adjusts to the RBA’s tightening cycle that began in May 2022. The first 10 percentage points of house price losses are expected to materialize by February/March 2023, and this central case appears to be on track, as the CoreLogic 5 capital city index has lost 9.9% from its May 2022 peak as of 2 February 2023, due to the RBA’s interest rate increases.
In conclusion, the Australian housing market is in a state of decline, with prices expected to continue to fall even after interest rates stop rising. However, there are signs of some momentum leaving the housing downturn, with auction activity ramping up and the reduction in the rate of decline evident across most capital cities. Investors should take these factors into consideration when making investment decisions in the real estate market.
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The Australian #housing market is currently undergoing a period of decline, as seen in the decrease of home values, auction results, & listings. The trend is expected to persist even after #interestrates stop rising. 🏡 #TheIndianSunhttps://t.co/tbIQpY5ZcN
— The Indian Sun (@The_Indian_Sun) February 5, 2023