Housing downturn endures, outlook unclear

Australia’s two largest property markets are driving the housing recession, but they may have already seen their biggest declines, some analysts say.

However, real estate market movements in Sydney and Melbourne are still heavily dependent on interest rates, with all eyes on the Reserve Bank’s decision-making process in the coming months.

Based on interest rate forecasts, falls in the domestic real estate market of between 15 and 20% have been forecast, including by the ANZ, which expects a decline of nearly 20% before a modest recovery in 2024.

Australian home values ​​fell 1.3% in July, according to the latest figures from CoreLogic, led by Sydney and Melbourne, where values ​​fell 2.2% and 1.5% respectively.

Industry economist Nicole Powell said the weakness that emerged in the market followed a “phenomenal” growth rate during the pandemic.

Major cities and the high-end segment of the market were driving the slowdown, Dr Powell told AAP, although the price drop was starting to spread geographically.

“This is just the beginning of the recession,” he said.

Based on previous downturns in Sydney, he said a 15% top-to-bottom drop was possible.

CoreLogic Research Director Tim Lawless also said the Sydney and Melbourne markets are likely to drop further, based on previous declines, with Sydney likely only in the middle of its down cycle.

Other capital markets, such as Brisbane, Adelaide and Perth, have so far proved more resilient.

However, Mr. Lawless told AAP that these markets appear to be flattening and are likely to be in negative territory by the end of the year.

He also said that the rate of decline has eased slightly in Sydney and Melbourne, suggesting that those markets have already seen their strongest declines.

However, he said that it largely depended on how high and how quickly the central bank planned to raise rates, with the more expensive housing markets typically being the most sensitive to rate hikes.

Real estate economist Andrew Wilson said Sydney, in particular, could be nearing the bottom of its correction based on the latest data from My Housing Market.

He said Australia’s strong economic performance relative to other countries meant it would undergo a less profound correction than expected.

Dr. Wilson pointed to low unemployment rates, which seemed to raise wages, but only modestly.

While these wage increases weren’t enough to counter the surge in inflation, he said modest wage growth has the advantage of not fueling inflation and triggering interest rate hikes. more aggressive interest.

“So all of these factors would lead you to think it might not even be as steep as some of those who have forecasts of 20-30%,” Dr. Wilson told AAP.

It also indicated the recovery in settlement rates in Sydney and Melbourne, which could also suggest an increase in market confidence.

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