Just when you thought that Australia’s housing correction couldn’t get worse, Cotality has revised its dwelling values index downward, meaning that values have fallen more sharply than expected.
Let me explain.
Cotality’s daily dwelling values index, which tracks home values across the five major capital city markets, has recorded a 3.8% quarterly decline at the 5-city aggregate level:
The daily dwelling values index has also recorded a 6.0% decline from its peak across the five major capital cities:
However, Cotality’s September dwelling value results, released today, show that values declined by 4.3% across the combined capital cities over the September quarter, significantly more than suggested by the daily dwelling values index (3.8%):
Source: Cotality
Moreover, the decline from peak across the combined capital cities has been revised to 6.4% across the combined capital cities, greater than the 6.0% implied by the daily dwelling values index:
Source: Cotality
You will notice above that Perth (-6.0% versus -4.6%) and Brisbane (-5.4% versus 4.7%) have experienced the greatest value downgrades.
Cotality will shortly update the daily dwelling values index to reflect the revisions.
Commenting on results, Cotality’s research director Tim Lawless noted almost every capital city suburb was down in value over the past three months:
“97% of capital city suburbs were down in value over the three months to end of September, highlighting the broad-based scope of this negative housing cycle”.
Lawless also noted that housing turnover has fallen by 19.1% year-on-year to be 13.3% below the five-year average:
“The sharp drop in sales has implications for the broader economy, with lower sales likely to hit some retail segments as well as stamp duty revenues for state governments”, Lawless said.
Meanwhile, listings continue to rise, up 23.1% year-on-year, amid weak demand.
“Despite fewer new listings entering the market, inventory levels have risen sharply because the rate of sale has fallen even faster. Capital city homes are now taking a median of 39 days to sell compared with 23 days a year ago, resulting in an accumulation of advertised supply”, Lawless said.
With the RBA’s rate hike on Tuesday and the likelihood of further rises, Australia is facing the largest price crash in generations.
I suspect we will follow New Zealand’s and Canada’s path of a two-year sharp decline, followed by years of nothingness:
Chart from Justin Fabo at Antipodean Macro
Fear of Missing Out (FOMO) will be replaced by Fear of Overpaying (FOOP).
