Australia's Housing Market Plunges Again, Further Pain Ahead
Australia's housing market continues to decline, with national home prices falling for a fifth consecutive month in August. Figures from property consultant Cotality show a 0.9% drop in home prices from July, when they fell by 1.2%. Sydney and Melbourne led the decline, with falls of 1.4% and 1.1%, respectively.
The downturn has significant implications for the economy, as falling house prices can erode household wealth and curb consumer spending. Economists warn that there is further pain ahead, with interest rates likely to continue rising due to stubborn inflation.
AMP chief economist Shane Oliver predicts a peak-to-trough home price fall of 10% in this cycle, which would be among the worst downturns in Australia's history. He believes the slump will weigh on economic growth but is not significant enough yet to change the direction of Reserve Bank of Australia (RBA) rate moves.
UBS analysts also expect house prices to drop towards 10% in this cycle, leaving the RBA facing a policy dilemma given falling house prices and high inflation. They predict another 25bps cash rate hike by November 26, which would be the fourth increase this year.