Australian home values record biggest fall ever

CoreLogic report reveals extent of decline

Australian home values record biggest fall ever


By Jayden Fennell

Australian home values have officially recorded their largest decline on record, falling 8.40% on January 7, after their peak in May 2022.

The findings from the CoreLogic Daily Home Value Index (HVI) takes the national housing downturn into new territory, breaking the previous record in peak-to-trough declines when home values fell -8.38% between October 2017 and June 2019.

CoreLogic says while the housing downturn between 2017 and 2019 lasted 20 months, the new record-breaking price falls have played out in less than nine months, with further falls expected in the months ahead.

CoreLogic, reporting the findings in its latest daily home value index, said the main force behind record home value falls was the recent cycle of rate hikes that have risen at the fastest pace on record, with a 300-basis point increase in the underlying cash rate over just eight months resulted in a rapid reduction in borrowing capacity, lowering the amount buyers could offer for homes.

“In addition to constrained borrowing capacity, higher interest costs may be dissuading potential buyers altogether,” said CoreLogic.

“Australians are also more indebted today than through historic periods of rate rises, with the latest Reserve Bank of Australia’s estimate of housing debt-to-income ratio sitting at 188.5%. A decade ago this figure was 162.0% and in 2002 the ratio was 130.2%.”

CoreLogic said higher inflationary pressures, combined with a post-lockdown surge in spending, had also eroded household savings, which could be utilised for a home loan deposit.

“This trend is also being reflected in low consumer sentiment figures, which has plunged to near-recessionary levels and traditionally coincides with fewer home sales. Softer housing demand may also reflect Australia’s ‘hangover’ from the elevated sales and listings activity through the 2021 boom, when an estimated 619,531 transactions occurred over the calendar year,” said CoreLogic.

“It was the highest volume of housing sales in more than 18 years.”

CoreLogic said more weakness was to come over the coming months.

“Housing market conditions are expected to remain soft. The underlying cash rate is likely to see further increases in 2023, with market expectations pricing a peak of around 4%, while the median forecast from Australian economists is lower at 3.6%. Ongoing increases in interest rates will further erode the borrowing capacity and likely prolong the country’s housing downturn until interest rates stabilise.”

On January 6, CoreLogic reported Australian house prices would bottom out in September this year, falling by 20% from their peak in April 2022.

AMP chief economist Shane Oliver said he predicted the price plunges would likely “re-accelerate” in the lead-up to the September quarter as struggling mortgage holders resort to “distressed selling” on the housing market.

Meanwhile, in December and as part of CoreLogic’s expansion across real estate technology solutions, CoreLogic International has entered into a binding agreement to acquire Victorian proptech firm Plezzel.

Established in 2011, Plezzel provides thousands of real estate directors, agents, and property marketing teams across Australia with customizable digital advertising and marketing support and an inquiry response platform, to help agents grow, build their brands, and drive more listings.

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