Australia’s housing downturn persists as RBA seen hiking further

AUSTRALIA’S housing downturn extended into October, with prices in every major city declining in response to rising interest rates and expectations of further policy tightening ahead.

Home prices in Sydney, the bellwether market, slid 1.3 per cent for a ninth straight monthly fall, CoreLogic said in a report Monday (Oct 31). Melbourne dropped 0.8 per cent while Brisbane decreased 2 per cent. These were the main drivers of a 1.1 per cent decline in major cities. 

The national index, which includes regional markets, fell 1.2 per cent. While the pace of decline eased in Sydney and Melbourne, it intensified in Brisbane, where home values are now falling at the fastest pace of any major city, CoreLogic said. 

The Reserve Bank is expected to hike by a quarter percentage point on Tuesday to take the cash rate to 2.85 per cent – a level not seen since April 2013 – weighing further on the market. The RBA has hiked by 2.5 percentage points since May and is widely expected to take rates above 3 per cent in coming months. 

Indeed, money market pricing implies a cash rate of just under 4 per cent next year while economists see a pause around 3.5 per cent. 

Lawless said the housing downturn so far has remained “orderly,” supported by below-average new listings that are helping limit supply at a time when demand is waning. BLOOMBERG