Housing Correction Remains Orderly For Now

CoreLogic house prices fell 1.1% m/m in January after 1.2% in December, the ninth consecutive fall. This brought the annual rate to -8.8% from -7.1% and house prices now stand 9.7% below their April 2022 peak. The correction to date has not yet unwound half of the Covid bounce in house prices of 25.1% but so far it is one of the largest corrections globally. Higher rates are weighing on the housing market but currently the adjustment is orderly and is likely to be an area the RBA is monitoring rather than wanting to pause over.

• Prices in Sydney fell 1.2% m/m and -13.8% y/y (December -1.4%/-12.1%) and Melbourne -1.1% m/m and -9.3% y/y (-1.2%/-8.1%).
• House prices nationally are still 8.1% above trend after peaking at 21.9%. While housing valuation, ratio of house price to rents, is improving as well, it remains overvalued by around 6.5%.
• Sales remain weak with new home sales falling 4.5% m/m and -41.6% y/y in December. A turn in this would be required for prices to turn up again.
• NZ CoreLogic house prices fell 0.3% m/m and -7.2% y/y in January after -0.2% and -5% last month, more moderate than Australia’s correction despite more tightening.