For three decades, the one trade every Australian knew by heart was "buy property in Sydney." Now it's disintegrating.
That's the gist of a Bloomberg feature from this summer, titled "One of the World's Longest Housing Booms Is Cracking in Sydney," which at the time read like a slightly alarmist look at a market that was "only" 3.6% off its peak. Two months, one rate hike and a whole lot of downward revisions later, it reads more like the opening chapter. According to the October Cotality data released just hours ago, capital-city prices fell another 1.4% last month and are now 8.1% below their March peak, with Sydney down 9.4% from a year ago. That's already most of the way to Goldman's latest peak-to-trough forecast of -12% (cut for the second time in two months), which would be a historically large drop for a country where housing is, well, basically the economy.
And the Reserve Bank of Australia is about to make it worse: on Tuesday the RBA is widely expected to hike for the fifth time this year, to 4.85%, the highest cash rate since the GFC. As Goldman's rates desk put it after last week's parliamentary testimony, the RBA made a "clear effort to downplay any dovish pushbacks (no concerns on financial stability, housing, household leverage, growth)."
In other words, the central bank has looked at the housing slump and decided it's somebody else's problem.
"The Surest Bet In Australia"
Start with the scale of the bet. "For the past three decades, buying a home in Sydney has been the surest bet in Australia," Bloomberg's Nasteho Said, James Mayger and Richard
