Australian home prices recorded their largest monthly decline in almost four decades in August, with rising interest rates expected to drive further falls this year and next.
(Bloomberg) — Australian home prices recorded their largest monthly decline in almost four decades in August, with rising interest rates expected to drive further falls this year and next.
Sydney, Australia’s largest market, slid 2.3%, Melbourne dropped 1.2% and Brisbane fell 1.8%, CoreLogic Inc. said in a report Thursday. They were the main drivers behind a 1.6% decline in major cities.
The national index, which includes regional markets, also dropped 1.6% in its worst monthly result since 1983.
The Reserve Bank of Australia began an earlier-than-expected tightening cycle in May and has since hiked by a total of 175 basis points to take the cash rate to 1.85%. It’s widely expected to raise again next week, with money markets implying a rate of 3.2% by December.
“It’s hard to see housing prices stabilizing until interest rates find a ceiling and consumer sentiment starts to improve,” said Tim Lawless, research director at CoreLogic.
RBA officials have signaled confidence in mortgage holders’ ability to absorb rising borrowing costs, saying households are in a “fairly good position” to cope with them.
Australia’s Slumping Property Market Raises Risk of a Recession
Lawless expects the RBA’s cash rate to rise by at least another 75 basis points from current levels, while adding that more housing stock is likely to come onto the market during the Spring selling season.
That will add “further downwards pressure on housing values,” he said.
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