House prices were surprisingly robust… until a few weeks ago.
Can anything ever slow down Aussie house prices?
Last week, Justin Fabo from Macquarie Group published the below chart last week on Twitter (X) showing that “housing prices appear to be rolling over in Canada and NZ (and possibly the UK)” But “growth in Australia is slowing but still solid”:
Remember, this has caught Aussie economists by surprise. House prices should have fallen further – given we’ve had over 400 basis points of rate hikes.
That should have had a bigger impact. AMP’s chief economist Shane Oliver reckons that there has been a 30% decline in borrowing capacity:
Normally that should have translated into softening house prices, but it hasn’t yet. Which has left economists wondering about our continued ‘solid’ growth.
But maybe we just spoke to soon. We haven’t seen it in the monthly numbers yet, but Corelogic also publish daily property prices. And when you look at that, the 28-day rolling change in the CoreLogic Daily Dwelling Values Index, shows a clear loss of momentum since rates were lifted on Melbourne Cup Day on 7 November:
So maybe we just spoke too soon?
Maybe. But when you break down the decline in national five-city median, you can see it’s all about Sydney and Melbourne. Prices are steady in Brisbane and Adelaide, and still growing at a decent clip in Perth.
And that might simply be because that Sydney and Melbourne are bumping up against affordability constraints.
When you look at the data on where it’s cheaper to buy than rent in Australia, there is almost nothing in the detached housing markets of Sydney and Melbourne.
And that’s not because rents there are cheap!
So it might be the case that Sydney and Melbourne have less head-room for growth than the other capitals… at least until incomes catch up.
The other thing to remember here is that not all rate hikes are considered equal.
The last rate hike was a shock. It caught people by surprise after pretty much everyone in the country thought the RBA was done.
In that sense, it had a big impact on the market. People suddenly found themselves unsure of where rates could end up.
That uncertainty creates a difficult market to buy into.
I expect buyers to remain nervous until we’ve had a good few months of no hikes under our belts.
In the meantime, prices could drift lower as buyers sit on the sidelines.
But once that certainty returns, the underlying fundamentals of the market (i.e massive housing shortage) will reassert themselves, and prices will steady.
And then once the cuts start coming, it will be off to the races again.