Red Hot Aussie Property Market Starts Sinking

Australia's A$2 trillion ($1.40 trillion) housing market, which has surged through the pandemic, has entered what many economists say is a downturn due to aggressive rate hikes from a central bank determined to squash runaway inflation, Byron Kaye reported for Reuters.

Photo Insert: Property prices in Sydney, the world's second-most expensive housing market after Hong Kong by some measures, have fallen 4.7% since April.

Pandemic-related savings and stimulus payments helped push up house prices nationwide by a quarter in 2021 alone. But now, little more than half of the properties being auctioned are selling in most main cities, down from three quarters as recently as March.

Property prices in Sydney, the world's second-most expensive housing market after Hong Kong by some measures, have fallen 4.7% since April, according to CoreLogic, the fastest decline in four decades. In the first six months of 2022, property repossession filings in Australia's three most populous states totaled 997, up 56% from a year earlier.

That was still well below pre-pandemic levels but signals mortgage stress, borrower advocates said.

"The boom was made possible by a shift from very high interest rates 30 years ago to recently very low interest rates, and that's now being reversed," said AMP Chief Economist Shane Oliver, who expects house prices to drop 15% to 20% from the peak of early 2022 to 2024.

With the Australian government warning inflation has yet to peak, most economists expect more rate hikes in coming months - the next is expected on Tuesday.

The Big Four banks - Commonwealth Bank of Australia, National Australia Bank Ltd., Westpac Banking Corp., and Australia and New Zealand Banking Group Ltd. - said they had not experienced a rise in mortgage enforcement, a sign the change is being driven by non-bank and subprime lenders - which lend to riskier customers for higher charges - which have a quarter of the market.

Australian Banking Association CEO Anna Bligh said repossessions remained at an all-time low due to a decade of initiatives to support customers in hardship, and "longer-term data trends should always be considered alongside any shorter snapshots."

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