October Corelogic Data

looks like the fall is slightly bigger as per CL published monthly Nov data
CoreLogic Home Property Value Index Monthly Indices - Sydney, Melbourne, Brisbane, Perth, Adelaide, Darwin, Canberra & Hobart


Sydney Houses Nov 18 update
Peak CoreLogic Index = 182 (Oct 17)

Nov18 Update,
CL Sydney house price index fell by 2.75 point,
CL Sydney house price Index = 163
(from 165.75 last month)
Fall from peak = 10.44%

Monthly rate of fall increased to an all time high of 1.51%,
When Nov18 falls are extrapolated yearly ,
Sydney house prices are falling at the rate of 18.13%..

PS: This is not what could happen, this is what has happened and is currently happening.

 

I suspect the truth is much worse considering the amount of price withheld sales. By the time the market resumes in the new year, I reckon we'll see some panic.

 

If Nov18 'rate of fall' continues we are looking at Sydney house price index at 130 (163-33) by Dec 2019, thats a fall of 28% from its peak.

28% was my worsts case scenario and by late 2021, looks like we are in quite a hurry to reach there.

 

Sydney is at late 2015 prices, which was very close to sep16 prices.

 

Interesting that OO credit growth seems to still be at about long term average, albeit on a downward trajectory. Given the big tightening of lending over the last 12 months I would have expected that number to be lower by now.

 

Does the graph represent number of loans or total value?

 

I assume total value.

 

Those who took equity out to buy more must be starting to get in some bother.

 

Purely looking at the five day fall so far in dec, as per CL data for Sydney house prices, we are looking at
Fall from peak will be close to 12.34% by end of dec18

CoreLogic Home Value Index - Daily Indices | CoreLogic

 

As per SQM Nov update,
In Sydney, property listings rose up by up 20.4% higher from a year ago.
In Melbourne listings jumped by 32.2% from a year ago,

https://sqmresearch.com.au/4%2012%2018_National%20Property%20Listings%20Rise%20in%20November_Media%20Release_FINAL.pdf

Discounting the usual have2 sellers like divorce/inheritance settlements etc,
Why would anyone sell at a lower price if they don't have to?
is it FONGO and/or forced sellers?

 

There’s actually less ppl listing than last year. The higher stock level is because things aren’t selling and are staying in the pool.

 

Sydney ‘flooded’ with home sales

 

As more and more properties start to hit the market over the next few months and in the lead up to the federal election, the monthly figures might get pretty ugly.

 

Great charts. A few random comments:

• The extrapolation of monthly figures to generalise longer term projections isn't particularly accurate @TheSackedWiggle. If you chart this series out there'd be a lot of volatility associated with its relatively short time horizon. Nonetheless, the statement about November is true. Those active on the ground could probably tell you this before the data too. As am aside, given your parameters, you can expand your arbitrary time horizon to ~48-60 months and Sydney housing would be close to worthless!
• Specifically its unit listings that are coming on in (not houses), at least nationally. May just be the construction supply cycle though.
  
• Elections lead to employment slowdowns (public sector freezes), uncertainty in investing, etc. This election will also carry a lot of negative noise for housing. Not exactly sure what this means, but it'll be part of the story.
• Consumption figures falling, growth may undershoot expectations. Again, part of the story.
• On the ground, I'd say there was a very clear shift in early November. I'd also say that many sub markets (for housing at least) are clearing at this price level & there's more buyers coming in at the lower price point. The natural price impact to demand appears to be coming to light. Too early to say though. Consumer sentiment surveys on 'time to buy' are beginning to reflect this now too. Interestingly, this data series has quite a noticeable correlation as a lead indicator of price movements.
• Still little signs of desperate selling that's typically associated with large price crashes.

 

of course, hence extrapolated just for a year
Property markets are like slow moving big cruises takes time to turn, Sentiments is changing/changed and is becoming worse by the day,
Do you think assuming a continuation of this momentum a stretch of imagination? given the rate of fall is not slowing along very many headwinds acting together?

Here's the latest listing figures from SQM its not just units houses are also increasing

and still the rate and extend of price falls in Sydney?
Imagine what happens if forced desperation along with FONGO creeps in?

IO2PI rollover is not over yet with majority of expiry due in next three years,
Given banks have issued $90bn in new interest-only loans along with existing 360bn expiry due the total refinancing task out to 2021 is roughly $450bn (excluding the preemptive resets)
I think, just a hunch with out any backing, there is much more pain left due to it then what your Models are suggesting. The maximum impact of this will play out in its full glory in 2020.

 

Desperate selling isn't required for prices to fall. They are falling plenty fast without it.

 

Mortgage stress is inching higher,
Household debts in-spite of recent falls is inching higher and is it all time high.



Saving/disposable income dropping?


Credit remains harder to get

 

If price falls in Syd/Melb so far had very little fearful/forced sales than that is even more bearish, isn't it?
Imagine what happen when desperation kicks in, which is not an 'if'.

 

Latest from RBA,

https://www.rba.gov.au/speeches/2018/sp-dg-2018-12-06.html

On policy response, IR cut and/or QE?
"Policy capacity matters, both monetary and fiscal.

Fiscal space is really important. We still have that in Australia. It is less clear there is fiscal capacity in some other countries.

Monetary capacity matters too. The Reserve Bank has repeatedly said that our expectation is that the next move in monetary policy is more likely up than down, though it is some way off. But should that turn out not to be the case, there is still scope for further reductions in the policy rate. It is the level of interest rates that matters and they can still move lower. We have also been able to examine the experience of others with other tools of monetary policy and have learned from that. Hopefully, we won’t ever have to put that learning into practice. QE is a policy option in Australia, should it be required. There are less government bonds here, which may make QE more effective. But most of the traction in terms of borrowing rates in Australia is at the short end of the curve rather than the longer end of the curve, which might reduce the effectiveness of QE. The RBA’s balance sheet can also expand to help reduce upward pressure on funding, if necessary, as occurred in 2008."


Debelle on house prices
"From what I can tell what we haven’t seen anywhere in the world is a decent fall in house prices in two capital cities at the same time unemployment is going down and the economy is growing at a reasonable pace. This is uncharted territory.

Credit is still flowing but at a much slower rate and it’s something we are watching – but that is as much a function of banks willingness to lend and not so much the price."

 

@TheSackedWiggle - the 'uncharted territory' comment is economic speak for the economy will hold price falls together and act as a resilience measure for the housing market - which has been the regulator position and they still likely hold this belief.

On a very generalised level, while a local economy is at full employment, growth is at 3, inflation is at 2, interest rates still & population is growing/construction is slowing - it's very difficult to have a crash in house prices. It defies economics. I.e. it's unchartered territory. It doesn't happen. Credit is a big part of the story, but credit is driven by the above economic factors (assuming supply is available).

He is not saying that the current correction is unchartered for the current economic background (although it would be if there wasn't a preceding boom). This has happened all around the world, was largely expected too. A larger drop in the next 12 months than the last would be unchartered.