Australian home prices fell 1.2 percent in October from September, a seventh consecutive monthly decline, property data firm Cotality said on Monday. September’s fall was revised to 1.3 percent. National values are now 6.7 percent below their peak and 2.8 percent lower than a year ago, and capital city values have fallen 8.1 percent in seven months, their fastest pace in 40 years, according to the firm.
The downturn is also thinning the market itself. Property sales fell 23 percent from a year earlier and stand 18 percent below their five year average, Reuters reported. The Reserve Bank of Australia has flagged housing as a downside risk to the economy while remaining sanguine about financial stability, noting that most mortgage holders would still be in positive equity even if prices fell 20 percent.
The figures land one day before the RBA’s final decision of the year. The cash rate stands at 4.60 percent after a unanimous 25 basis point hike on September 29, and a further rise to 4.85 percent on Tuesday would take it to its highest since 2008. Reuters reported markets implying nearly a 90 percent probability of a hike, with about a 20 percent chance that rates reach 5.10 percent, firmer pricing than the roughly 79 percent carried in this site’s week ahead file on November 1.
The case for tightening is the inflation print. Headline CPI rose 4.3 percent in the year to September, above the 4.2 percent forecast, and the quarterly trimmed mean rose 1.0 percent against the bank’s August forecast of 0.8 percent, the Australian Bureau of Statistics reported on October 28. Against that, the labour market lost 39,300 jobs in September and housing is now subtracting from household wealth at a record pace, the tension the bank’s statement and updated forecasts, published with the decision, will have to resolve.