The summary version? Both are going down. No real surprise there. But the recent REIV* figures are a bit of a surprise. The monthly price index (you’d need to be a statistician to understand the formula) is showing a rapid drop. The latest report released today (23/8/22) shows a drop of 2.5% in the last month. Combined with the June and July figures of 4.1% and 3.4%, that’s a total of 10% in 3 months!
That’s a lot more than is generally talked about and is more in line with what it has felt like in the market over the last few months. The exact number is not likely to be accurate, but the general thrust is fair. There has been a significant shift quite quickly.
Given the predictions of 15-20% drops from top to bottom by most economists, we are well along the path already. The top was last October.
At the same time, transactions (sale numbers) have also dropped from around 13,000 per month a couple of months ago, to about 10,000 in the current month. This is actually a blessing in disguise. The reduced number of available properties will help slow the price drops. By available properties, we mean properly priced ones. There are always those that simply sit on the market because prices don’t meet the new conditions.
Our expectation is for the correction to be smaller than most predictions. Likely helped by interest rates not being hiked as much as expected. Don’t be surprised if the RBA acts more cautiously from here. Maybe two more rises, then a pause. They will be keen to avoid a recession unless inflation is still running rampant.
- Real Estate Institute of Victoria