What the updated rate hike forecasts mean for housing values


A cash rate forecast update from ANZ Bank has reverberated through the banking and finance and property industries this week.

The Reserve Bank has also publicly stated the official interest rate is still probably well below where it needs to be.


More will be known following next week’s June quarter inflation figures, followed closely by the RBA’s regular monthly meeting on the first Tuesday in August.

Despite the RBA’s view that Australian households are well-placed to manage further rate hikes, what would the ramifications be if the upwards revision to ANZ’s cash rate forecast proves correct?

Long story short, it would spell more bad news for the trajectory of housing values.

Since the first rate hike in May, the downwards trend in value growth has steepened, with the rate of decline accelerating across Sydney and Melbourne.

  • Interestingly Brisbane, which was previously enjoying a run of high quarterly growth in housing values, has abruptly joined the declining trend with the rolling four-week change in dwelling values turning negative through the first week of July, according to CoreLogic’s daily hedonic home value index.
  • Since peaking, Sydney housing values are down -4.4%, with most of the decline (-3.8%) occurring since the May 5 rate hike.
  • Similarly, in Melbourne, housing values are down -2.6% since then, comprising the bulk of a peak to the current decline of -2.8%.

Growth in housing values is broadly slowing around the country, and it is likely more regions will succumb to negative movements over the coming months.

CoreLogic’s data released this week showed of the 3,085 house and unit markets analysed in the June quarter, 41.9% had declined in value.

It’s double the proportion that recorded negative rates of growth in Quarter 1.

For perspective at the height of the 2017-2019 downturn, almost 81% of house and unit markets were recording a quarterly decline in value.

In the early phase of COVID, housing markets went through a broad-based but short-lived decline when 67% of markets fell.

During the peak of the pandemic growth cycle in early to mid-2021, only 3.2% of markets were recording a decline in value.

Household debt at record highs

With household debt at record highs and most of that debt held in housing assets, the household sector is highly sensitive to the rising cost of debt.

Add to this the extremely high prices for non-discretionary goods such as food and fuel, and it’s clear that household balance sheets are likely to be more challenged as mortgage rates increase.


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