Australia’s housing market downturn extends, while decelerating
Add BT as a preferred sourceSelamat Sanwan
AUSTRALIA’S housing downturn extended into November and continued to decelerate, suggesting the property market is beginning to adjust to higher borrowing costs and even the prospect of more interest-rate hikes ahead.
The slowdown in the pace of correction was mainly due to Sydney, the bellwether market, where prices slid 1.3 per cent for a 10th straight monthly fall, CoreLogic said in a report on Thursday (Dec 1). The national index, which includes regional markets, fell 1 per cent in November — the smallest decline since June.
The data suggest the A$9.7 trillion (S$9 trillion) housing market is holding up surprisingly well in the face of the sharpest monetary tightening cycle in a generation. The Reserve Bank (RBA) has raised interest rates by 2.75 percentage points since May to 2.85 per cent and is widely expected to hike again next week.
“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off,” said Tim Lawless, research director at CoreLogic. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.”
On Wednesday, a senior RBA official expressed confidence in Australia’s housing market, highlighting that prices are still 20 per cent higher than at the onset of the pandemic. In addition, with unemployment at the lowest level in almost 50 years, borrowers are well placed to meet their commitments and loan arrears are likely to be limited.
Lawless highlighted that next year was likely to really test the housing market as record-low fixed-rate mortgages secured in 2021 start to expire and such borrowers are forced to shift to much higher variable rates.
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“There is still the possibility that the pace of declines could reaccelerate, especially if the current rate hiking cycle persists longer than expected,” Lawless said.
Across capital cities, Brisbane and Hobart led the monthly rate of declines, both falling 2 per cent. Meanwhile, Perth values were unchanged and Darwin nudged up 0.2 per cent over the month. BLOOMBERG
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