Australia’s housing market suffered its biggest annual decline since 2008 last year as sharp interest rate hikes sapped buying power and put off investors.
The national Home Value Index fell 5.3 per cent in 2022, the first decline since 2018, CoreLogic said in a report on Tuesday. Annual falls were the biggest in the bellwether market of Sydney, which slid 12.1 per cent, followed by an 8.1 per cent drop in Melbourne. National values declined 1.1 per cent in December, according to the report.
Home values could fall further in the early months of 2023 before stabilising after interest rates peak, according to Tim Lawless, research director at CoreLogic. Despite the downturn across many areas of the country, “housing values generally remain well above pre-Covid levels,” CoreLogic said in the report, suggesting the sector is weathering the sharpest monetary tightening cycle in a generation.
The Reserve Bank has raised interest rates by 3 per cent since May to 3.1 per cent and is widely expected to hike one or two more times this year. RBA officials have generally expressed confidence in Australia’s housing market, highlighting that prices are still higher than at the onset of the pandemic. In addition, with unemployment at the lowest level in almost 50 years, borrowers are well placed to meet their commitments and loan arrears are likely to be limited.
Australia’s A$9.4 trillion ($6.4 trillion) housing market has declined 8 per cent from the recent peak reached in April, after surging 28.6 per cent from a pandemic-induced trough, CoreLogic said.
Mr Lawless highlighted that 2023 was likely to test the housing market as record-low fixed-rate mortgages start to expire and such borrowers are forced to shift to much higher variable rates.
An RBA document last month showed some 30 per cent of Australian borrowers on fixed-rate mortgages will see repayments climb by more than 40 per cent when their loans roll over in 2023.
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The currency conundrum
Russ Mould, investment director at online trading platform AJ Bell, says almost every major currency has challenges right now. “The US has a huge budget deficit, the euro faces political friction and poor growth, sterling is bogged down by Brexit, China’s renminbi is hit by debt fears while slowing Chinese growth is hurting commodity exporters like Australia and Canada.”
Most countries now actively want a weak currency to make their exports more competitive. “China seems happy to let the renminbi drift lower, the Swiss are still running quantitative easing at full tilt and central bankers everywhere are actively talking down their currencies or offering only limited support," says Mr Mould.
This is a race to the bottom, and everybody wants to be a winner.
Five healthy carbs and how to eat them
Brown rice: consume an amount that fits in the palm of your hand
Non-starchy vegetables, such as broccoli: consume raw or at low temperatures, and don’t reheat
Oatmeal: look out for pure whole oat grains or kernels, which are locally grown and packaged; avoid those that have travelled from afar
Fruit: a medium bowl a day and no more, and never fruit juices
Lentils and lentil pasta: soak these well and cook them at a low temperature; refrain from eating highly processed pasta variants
Courtesy Roma Megchiani, functional nutritionist at Dubai’s 77 Veggie Boutique
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
