After epic boom, Aussie house prices are going bust

As we already know, the decline in values nationally were driven by Sydney and Melbourne, which recorded steep falls.

Quarterly price growth has become two-speed across the major capitals:

As well as across the capital cities and regions:

PropTrack’s index shows similar results with a 0.11% decline recorded nationally, led by circa 0.3% declines across Sydney and Melbourne:

It is fair to say that the Australian property correction has begun. How deep it goes will depend on how aggressively and far the Reserve Bank hikes interest rates.

If the median economist is right, and the cash rate lifts to around 2.25%, then expect a heavy correction (circa 15% fall nationally). If the market is right, and the cash rate climbs to around 3.5%, then expect a full on crash (over 20% price fall nationally).

My view is that the RBA will be stopped out much earlier and won’t hike rates nearly as aggressively. If so, then price falls would obviously be lower.

Pass the popcorn.

Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also Chief Economist and co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

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