“So far, we haven’t seen any evidence of panicked selling or forced sales”: CoreLogic.
By Wolf Richter for WOLF STREET.
In the most glorious housing bubbles, home prices are tumbling, as inflation is surging and central banks are trying to contain this raging inflation with rate hikes, and so mortgage rates are surging, and home prices are tanking – this is now the theme in lots of countries, particularly those with majestic housing bubbles, such as Australia.
In Australia, inflation spiked to 7.3% in the third quarter, up from 6.1% in the second quarter, and up from 3% a year earlier. The Reserve Bank of Australia has hiked its target for the cash rate six times so far this year, from 0.1% to 2.6%, but lagging woefully behind surging inflation. A seventh rate hike is expected on November 1, to 2.85%, while inflation is raging at 7.3%.
Home prices across Australia, after falling another 1.2% in October from September, have now dropped below year-ago-levels (-0.9%).
This year-over-year decline makes Australia’s housing bust far more advanced than the housing bust in the US, where home prices have been dropping for a few months nationally, but are still up from a year ago.
Home prices in Sydney fell 10.2% from the peak in January 2022, after dropping another 1.3% in October from September, with house prices falling faster than condo (“unit”) prices, according to CoreLogic.
Year-over-year, home prices in Sydney fell 8.6%, as the ridiculous spike during the pandemic is getting systematically unwound.
Home prices in Melbourne fell 6.4% from the peak in February 2022, after dropping 0.8% in October from September. Year-over-year, they’re down 5.6%.
The eight capital cities.
Home prices fell in all eight capital cities on a month-to-month (MoM) basis. Prices are now down year-over-year (YoY) in four of them. And in the other four, the monthly price declines are whittling down the year-over-year gains.
|Oct. 2022||MoM||YoY||From peak||Median, A$|
“I think it’s important to keep in mind that inflation is sticking around, and this has the potential to see further lifts in the [RBA’s] cash rate,” Eliza Owen, head of Australian research at CoreLogic, told ABC news. “So, there is some risk that this downturn could really accelerate.”
“So far we haven’t seen any evidence of panicked selling or forced sales,” said CoreLogic’s Research Director Tim Lawless.
And the decline is still “orderly,” he said: “To-date, the housing downturn has remained orderly, at least in the context of the significant upswing in values. This is supported by a below-average flow of new listings that is keeping overall inventory levels contained.”
And so far, so good: “There’s also tight labor market conditions, an accrual of borrower savings, and a larger than normal cohort of fixed interest rate borrowers, who have so far been insulated from the rapid rise in interest rates,” Lawless said.
Just working off the free-money price spikes during the pandemic. These were the ridiculous price spikes from March 2020 through the respective peaks in 2022 that are now getting worked off in an “orderly” manner:
- Adelaide +45%
- Brisbane +43%
- Hobart +38%
- Canberra +38%
- Darwin +31%
- Sydney +28%
- Perth +26%
- Melbourne +17%
Sales dropped 16.6% across the capital cities compared to the blistering sales a year ago, but were up 3.8% from the five-year average for this time of the year.
“Housing finance data shows subsequent buyers, such as upgraders, downsizers or movers, have been the most resilient sector of the market since interest rates started to rise. As interest rates rise further, it’s likely sales activity will also trend lower as borrowing capacity is reduced,” Lawless said.
Total inventory was down 5% from a year ago and 18% from the five-year average. New listings fell 25% from a year ago and were down 19% from the five-year average.
To which Lawless said: “The low number of freshly advertised properties is probably helping to contain price falls to some extent.”
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What do they even make in Australia, besides kangaroo meat? Where do they get a million dollars for an average home? I am trying to think if I’ve ever even seen any made in Australia product.
Apparently they manufacture housing bubbles in Australia. It costs nothing, and the crap sells for a lot, so the profit margins on it are really high!
I forgot about Fosters beer and ostrich boots.
We export food, minerals, oil and gas. We don’t make anything, we just dig it up and ship it out.
Give it time as economies level out and it will be more advantageous to manufacture in Australia then in countries like China.
Population of Australia is 26 million, same as Shanghai.
Much of what has been said in the above comments is true. How did we get to this point? Australian governments followed the prescriptions of the economic theorists: do what you do best, forget the rest. So they got rid of tariffs and subsidies. Industries had to either sink or swim. Many sank, some swam to China. So we lost our textiles and clothing industry, we lost much of our manufacturing industry including steel-making, we lost our car manufacturing, we closed down our oil-refining industry etc. We concentrated on exporting LNG, iron ore, thermal and coking coal, agricultural products and education particularly to China. All this served us pretty well until our previous prime minister spoke out strongly against Chins in relation to Covid, the Chinese miltarization of the South-China Sea etc. whereupon China slapped us with tariffs for all our exports to China except coal and and iron ore because these are vital to the Chinese economy. But I digress.
Australia has already been there and done that. They comported themselves quite admirably in world war two.
Mining is huge
Australia is a weird mix; it exports resources (iron ore, coal, oil, gold, and a bit of meat). There are only 25m people in an enormous land, so the currency is priced based on digging up dirt and putting it on ships, not manufactured goods. This causes a couple of issues; government can control most of the money and tax flow and distribute it to their friends (think Saudi Arabia of Iron ore), and the currency is expensive so wages are high making manufacturing uncompetitive. Immigration is high (universities basically sell visas, not education) and politicians love that because it in turn drives central planning: corruption, pouring concrete, development approvals, and building condos. Almost everyone i know works for government, or in construction.
Excluding asset bubbles, we don’t make much of anything beyond Nobel Prize winners in medical research.
We dig it up and export it – iron ore and coal mainly. Lots of it.
High iron ore price = Government surplus.
Low iron ore price = Government deficit.
BTW, Fosters is not consumed locally but made for the US market, which reminds me of a riddle:
Q. Why is Fosters like making love in a boat?
A. They’re both f**king near water
We have Bernanke who got the Nobel prize for inventing the printing press I think.
Bernanke didn’t invent the printing press, but is a disciple of the Johannes Gutenberg school of economics.
Benjamin Shalom Bernanke …..
A name written in infamy for all time
Andy. That “Nobel Prize” Bernanke got was a pay off from the 1% who liked what he said and did for them. Nothing “Nobel” about it either. The money for the prize came from a Swedish bank..
And the backstopping of any losses in the U.S. stock market since 2012 which should have been deemed a criminal act. That had Bernanke’s name written all over it.
Mining, energy, agriculture, education.
Australia does enough with that that Australians can afford a pretty good life. The medium income earner in Australia is far better off that an US citizen.
High income earners in the USA do better though.
When it comes to housing bubbles though Australia puts the US to shame. High rates are going to hurt many buyers because in Australia mortgages are rarely fixed and if they are it is only for a few years.
We use to make everything until the politicians sold us out.
Now we have mining, mining and mining and farming.
Classic Yankee ignorance. All that Chinese junk you book up on one of your credit cards is made from Aussie iron and other metal ores refined in Chinese refineries using Aussie coal.
You sound like an angry wombat that’s shimmied up a paw paw tree. Dingo get your baby?
Jokes aside, I aspire to join an Aussie lawnbowling club sometime in my life just so I can wear all white and not be viewed as a pimp.
Exactly what I was going to say reading the comments above. Are Americans the most ignorant when it comes to other countries? Chanting USA USA when in actuality the US has a horrible quality of life and is surpassed by numerous countries on many measures.
I’m American and I can vouch. We are insufferably ignorant and proud of it. It’s only getting worse as we stumble through our current de-enlightenment.
Horrible quality of life?
I know things have been on a downtrend here for the last 50 years or so, but who in their right mind would call America out for “horrible” quality of life.
I am very much middle class, on a nice plot of beautiful land, and I want for nothing.
So does the majority of people.
America is the greatest country the world has ever seen and still remains so.
jtm, that is a truly dick American thing to say. It’s why so many people outside of America dislike us and don’t really want us around. Arrogance is an ugly thing, but arrogance and ignorance together is becoming more and more American.
Believe it or not, jtm, there are many countries where children do not have to go to school wondering if it’s going to be their last day on earth. Or where people can go to a holiday parade without fearing some madman on a roof is going to shoot them. So yes, this country has a horrible quality of life!
” Aussie iron and other metal ores refined in Chinese refineries using Aussie coal”
China wins this one. Exporting raw ores and other outputs makes one an economic colony. Value-added manufacturing is where wealth is earned. Ask, say, Japan….
Australia needs to be exporting manufactured goods, not raw materials.
One thing the Aussies can do well is Party! When I was working in Indonesia for Big Oil and holidaying in Bali on weekends off, the clubs were full of visiting Aussies having one hell of a good time. Boy those were fun times.
Excellent value wine and Extra Virgin Olive Oil… unlike Italy where the criminals are making more money off of adulterated olive oil than drugs, the Australian government pulls bottles of olive oil off the retail shelves and tests them. Companies in violation are banded from the market.
I’m on the other side of the world from Australia (Sweden) and I’m very fond of their wines.
Mining, mate. Base metals and precious metals….can give the US a run for its mining when it comes to extraction. Oh, and RM Williams and Blundstone.
Rode microphones – still made near Sydney, and reasonably price. I believe their factory is highly automated.
Hahahahaha, no, I’ve got one of them for my podcast. It’s “designed in Australia, made in China.”
Well, they still claim some of their stuff is made in Australia – I’m planning on getting a pair of M5s ($200 for both), and according to Amazon, they’re still made in Australia, but I’ll know for sure when I get them.
I’m not surprised the podcast-oriented products are made in China.
I got an NT-USB Professional USB condenser microphone, I see it now priced at $155 on Amazon. Not sure what I paid for it back a few years ago when I bought it.
Actually it says on the microphone itself: “Designed in Australia, Assembled in China,” now that I’m actually looking at it.
Thanks for the info – I like observing COO (Country of Origin). I’m curious to see where the M5s are currently made, but won’t know for a couple weeks.
Today I was browsing engineered flooring at various stores, and noted that made in Vietnam is now becoming common.
COO can be highly misleading. I know a company that does 95% of the work in one country but the remaining 5% in another and that last 5% is enough to classify the COO as a western made product. The 5% is probably the least labour intensive as well and the BOM is pretty simple.
@Bob Down, that applies to products made in China, too. Or say an Intel CPU made in Malaysia – it’s packaged in Malaysia, but the actual silicon was processed in an Intel fab elsewhere (US, Israel, Ireland, etc). Supply chains are still incredibly complicated.
While browsing HD’s BF deals, I’ve noticed some more detailed COOs, like pliers made in Thailand & finished in China, or DeWalt says what sizes of drill bits were made where.
BTW, US Customs does have standards on minimum transformative work to be considered made somewhere to prevent trans-shipping (e.g. China->Vietnam->USA), and if the importer gets caught, the penalties are nasty.
The term “Australian Made” as per the ACCC means that “the last substantial transformation occurred in Australia”. This means foreign ingredients baked into a cake results in an Australian Made Cake….some times very little input is required to get over the line.
The only people buying homes are people who are transferring equity from another home. And the people with low mortgage rates dont want to sell and not alot of distressed sales since most homes are well into the positive on equity.
This is the first stage of a home collapse.
The second stage is where denial that prices are going down collapses. This is when after a year, prices continue to fall and now home owners begin to realize that in order to sell that home they must reduce the price dramatically.
And with each month of lower priced sales, the buyers continue to strike, as they realize that a home purchase is a quick way to lose all your equity.
It will take 2 years to get to the point where there are significant forced sales due to recession and homes that are underwater in value. This is what needs to happen to stop the massive inflationary cycle.
Then finally, home prices come down to where there is demand at normal interest rates. And home prices bottom.
During the next year, sales volume will be tepid at best.
Houses and Holes is what we make.
I always loved the way Aussies talk. It has a certain music and ambivalent directness to it.
We export a lot of raw materials and fossil fuels. We also export food, dairy and seafood – along with beef and lamb. You are right though – Australia exports – or even makes – very few manufactured products.
The housing bubble is actually one of our big money earners. Property continues to rise overall – with a few dips here and there.
Most loans are 1,2,3 year fixed reverting to higher rates after. Wait till these start rolling off. On flip side oz is only country seeking increased immigration in 2023
Maybe you mean ”officially” seeking increased immigration AJ?
Read the recent public comments from Marty Walsh, and you will see that although some politicians speak otherwise, ALL of them, the paid puppets of the rich folks, are committed to MUCH more immigration in USA.
IMHO, WE, in this case WE the PEEDONs have the choice of getting off our phones and back to work,,, OR more immigration.
Based on recent reports of folks retiring early, doing their best to avoid work, etc., etc., it certainly seems we will need a ton more LEGAL workers, especially those who are willing to do the manual labor still needed and likely to be needed for decades to provide sufficient food, build new homes, etc., etc.
Without immigration, who will dig in those mines and who will buy those expensive houses to keep the bubble from popping.
And still Australians hate immigrants! They should be worshiping them as their saviors.
Or they can actually start working productively themselves.
Immigrants do noting but lower your standard of living. I live in Canada and most of the immigrants who come here are from the third world and are penniless when they arrive.
Commodity export country and food export
To name a few
Left hand side: Mining especially iron ore to China, but everything else from diamonds to rare earths.
Right hand side: No significant production of anything. The entire economy consists of selling Australian farms, factories and homes to the Chinese.
And there’s an immigration Ponzi scheme where more and more migrants are imported, mainly from China, and added to the GDP as if that constituted growth.
Well said Harry.
The decline of Australian manufacturing is a sad and complicated story. The country once was a manufacturing powerhouse, for its size of population.
The briefest of explanations is that it all changed largely because governments and wage setting authorities – over time – gave far too much credence and latitude to trade unions’ demands for disproportionately higher wages and ridiculously generous working conditions. Then the unions set out to stymie just about every endeavour that didn’t involve them.
That of course put up prices of doing business, raw materials, supply chains (etc ad nauseam) thereby rendering many important, even critical, businesses uncommercial.
And foreign investment realised it could get stuff done and built cheaper elsewhere. So (again over time) heavy manufacturing went into a decline: steel making, ship building, smelting, motor vehicle production facilities etc closed and/or located elsewhere. All the stuff Australia was good at.
As did many other seriously large industrial employers.
Meanwhile Australia happily outsourced its manufacturing capacity to China, Vietnam, et al. It became an importer. Sometimes of its own a primary produce. Along the way it lost the knowledge and experience of being a secondary and tertiary producer.
Consequently Australia is now not a lot more than a very big open pit mine surrounded by farms, sheep and cattle stations, military bases and oceans. Additionally and unhappily, many of those assets are foreign owned, and not always by the good guys.
The longer story – far too wordy for here – is testimony to:
• the stupidity and short sightedness of governments and vested interests over many years,
• the rampant greed of unions (their influence is utterly disproportionate to their size – in 2020 just 14% of employees in Australia [1.4 million] were trade union members), and
• the laid back attitude of a big chunk of the Australian population to let this situation fester and develop.
Please just remember that the next time you use your photocopier, turn on your wifi, have an ultrasound, put your baby in a car capsule, slap on some sunscreen, or turn on your (not yet built) quantum computer there was Australian ingenuity involved in its discovery. Along with thousands of other inventions that are used in your daily lives. It’s just a pity that unions and the dopes in governments at all levels have not been smart enough to see the benefit of ownership and getting these things built in Australia.
Meanwhile, last month Credit Suisse calculated which countries are the world’s wealthiest, based on both median and mean wealth. Guess which little country comes in at No. 1 for median and No. 4 for mean?
This comment also fits usa,where airline pilots just turned down a 17% pay increase .Totally unsustainable
I think that increase was supposed to be spread over something like two years (AA offered 19% increase spread over two years). It’s still a lot. 19% over two years amounts to about 9% per year, compounded.
“gave far too much credence and latitude to trade unions’ demands for disproportionately higher wages and ridiculously generous working conditions. Then the unions set out to stymie just about every endeavour that didn’t involve them.”
An interesting misinterpretation from the playbook. Without a shred of evidence for the back of the hand slap to the very foundation of society that well paid citizens, represent.
It wasn’t the unions that decided to hire the Chinese communists to assume those jobs and industries. It was the owners and managers. A group that Adam Smith warned against ever giving a policy making role because the would sell their own, …./
In 1993 I was advised China was buying up the Gold Coast and owned half back then. Assuming trajectory continued Oz is China’s back yard.
Seems like a pretty easy way to take country over .With no bloodshed ,of course then Australians will be slaves
Im an Aussie currently looking to buy a property in Sydney. i can tell you there is no panic yet in sellers. sales cycles are lengthening but sales are going through at still high prices. there is a C19 back up in demand. the other big factor is that in C19 3/20 the Government lent a huge amount of cheap $ through the banks in 3 years fixed loans. they expire March 2023. refinancing will be a struggle. i am hoping to buy JAn-jun 2023 see how it goes. real estate is an investing religion down here.
Despite real investment being a religion in Australia, Sydney home prices have fallen more than 10% from its peak. It has much more to go unless inflation goes down big time and banks reduce rates.
Just to be consistent, all figures in column 1 (MoM) should also appear red rather than black?
The idea of the red is to point out what’s “important.” The minus sign indicates the negative value, the color red indicates what’s important. MOM declines are not important in this table — nice to know but not important. Declines YOY and from peak are import.
And here you were probably thinking there’d be no need to answer any really stupid questions before breakfast. Thanks for claryifying the point.
Today Australian Central bank increased rates by meagre 0.25% (25 bps).
Reason given by CB :
1.all house mortgagers are in short term fixed interest rates . last 3-4 increases have yet to filter thro (Read Housing Ponzi will collapse if we do higher faster like USA)
2.Iron ore (dirt is the main export) prices has dropped to 80$/ton
3.Wage increase not like USA (since constantly importing immigrants) If US federal reserve does 75bps then aussie might blink.
The severe weather in New South Wales and Victoria will surely make matter worse – across the spectrum. Being in the Sarasota, Fl area and just missing the most severe whirl of Ian, will change you POV on some things.
Sure, home prices will decline. Hopefully another 5% is all, and not 100% (for some).
The global central banking system is quite a racket. Since I was in a field that benefited from all of this, I never even thought to consider the flip side until 2018 when it hit me like a ton of bricks, and I finally woke up.
No empathy required to play this game at the highest level.
Off subject, based on articles and live police cam footage, it was made to appear like Australia was completely authoritarian during the lockdown period. Almost like Australia was England’s beta testing facility for policy?
Back to the article – and to some comments above regarding Australian GDP – I did some quick reading, since I know little about Australia, and according to an Australian news outlet: Australia falls, only, behind, Switzerland in a lot of recent wealth metrics. I imagine the numbers and %’s and ticked out a bit, but still. Who’d (outside Australia) would have guessed?
I’d be curious to see how much, if any, the wealthy from London and the City Of, along with Royalty, have influenced these numbers?
.. I imagine the numbers and %’s **are tricked out a bit** …
I’m American, and moved to Australia twelve years ago.
I’m a doctor, who rather work here than the US. The health system is next to perfect in comparison to the US. Somethings are better, few things are worse…for the average person.
If your talented, and hard working….you will do just fine. If you have a dream of creating something, this is not the place…go to Silicone valley.
It’s lovely place, with a very high standard of living. Maybe like the US 30 years ago..The bottom 15% are looked after…not a lot of guns, or violence.
Property is the major topic and wealth engine….will be hard for most to see this wealth creator stall.
I experienced the post GFC in the US, and came to OZ in 2010….since then I saw the same type of greedy behaviour which was in Florida, California and elsewhere..
Maybe things are different, until they are not. Greed in housing has been a major driver, and pride come before a fall
Economies that are based on asset values are the most vulnerable.
Treasury bond yields going up so fast really changes things for income producing things like a rental property and dividend payers. Our big local utility is Duke Energy. It’s dividend yield at yesterday’s price was 4.38% or less than some places on treasury curve.
Treasuries vs. other income producing assets is a little like comparing apples to oranges, but if the yields go much higher they are going to really cause other asset prices to fall. Another 1% increase in treasuries wold mean other income producing assets would need to fall around 20% to be competitive.
Factors that have created the Great Australian Housing Bubble.
1). Lowering of interest rates.
2) Loose lending standards.
3) Government grants and incentives (free money) to first home buyers.
4) Tax breaks for property investors.
5) Property investment funds restricting supply by land banking.
6) Media hype
The rise and rise of interest rates is reversing all the above except for points 3 and 7.
Hence, Government has just increased immigration to its highest level in history and are re-introducing more free money grants to first homebuyers as incentives to buy to keep this thing going.
That is all mal-investment and will eventually lead to Australia becoming a third world economy.
– The notion that immigration is a force pushing house prices higher is nonsense. One has to look at it this way. There is a certain amount of money sloshing around in every country. If you increase the amount of people then the people in that country share the same amount of money with more people. In that regard (more) immigration is actually a force pushing real estate prices lower.
I can’t help but think that 2021 to January 2022 was a blow-off top in all markets. We had extremes in bonds, housing, credit issuance, government debts and even used cars. What’s left is a big pile of debt.
I also wonder if we have many years of stagnation ahead of us, to work off the craziness we just experienced. There are signs that it’s starting, but we may have along way to go because full employment seems to be holding up the fort for now.
If CBs reverse the tightening path it may cause another crazy blast off to the moon, but that would be ill advised.
But if I work all day on the blue sky mine
(There’ll be food on the table tonight)
And if I walk up and down on the blue sky mine
(There’ll be pay in your pocket tonight)
And some have sailed from a distant shore
And the company takes what the company wants
And nothing’s as precious, as a hole in the ground
Are beds burning, though?
Great band – Midnight Oil. Blue Sky Mine was a cool video too.
Interesting to hear about the homeowner incentives to apparently keep prices elevated in OZ. Similar incentives in US (VA / FHA loans) not likely to have much effect and bubble unwinds. I wonder if HUD / Congress will cook something up in the next couple years.
The US already has HUGE incentives, including government guarantees for 30-year mortgages, low interest rates and low down-payments for high-risk borrowers guaranteed by the government (FHA, etc.) Fed buying MBS, first-time buyer incentives by some state and local governments, government-sponsored forbearance of mortgages, federal flood insurance, tax benefits, and on and on. There is nothing more subsidized by the taxpayer than homeownership.
– But A LOT OF these subsidies are actually subsidizes for the builders, reals estate agents & banks.
I had dinner with a couple – he a builder, she a loan broker – a couple of months ago. When I expressed concern about Europe going into a deep recession this winter and the possibility of contagion spreading to other world markets, they scoffed, “It will never happen here. We are safe, We are “the lucky country.” I think because Australia dodged the economic downturn in 2008-2009, citizens feel invincible. Many grew their wealth in the housing market after that point. If a bad recession happens here, people and our government, will be completely unprepared.
– Australia is #2 in the world when it comes to having the most household debt. The US is “only” #12 or #13 on that list.
– Australians were able to dodge the GFC because in 2009 1)) the australian government send every tax paying household a check of AUD 300,– 2)) China went on a building spree fueled with A LOT OF extra debt. That building spree required A LOT OF iron ore to be imported from Australia. 3)) Australians borrowed their way out of the “recession”.
– The US saw a contraction of its GDP whereas Australian continued to borrow their brains out. All those things combined was the reason why Australia was avoided a contraction of its GDP or only had a minor contraction of GDP.
Fascinating article. How are you so certain that the Fed reserve will not pivot on rate hikes?
Raging inflation. Now in services, and getting wrose: