Australian Capital City Home Prices Fall 8.1 Percent From March Peak as RBA Set to Lift Cash Rate to 4.85 Percent

The Reserve Bank of Australia began its tightening cycle in February and is expected to deliver a fifth hike on Tuesday, taking the cash rate to 4.85 percent. Goldman Sachs revised its peak-to-trough forecast twice in two months to minus 12 percent, citing the central bank's decision to disregard housing leverage and household balance-sheet risks in its September parliamentary testimony. Mortgage applications dropped as much as 20 percent after the May budget removed negative-gearing eligibility for new investor purchases, while quarterly mortgage growth had earlier run at nearly double consensus forecasts.

Sixty percent of Australian household wealth is held in property, and Sydney median prices reached almost 14 times annual disposable income before the downturn. The CEDA report documented a two-decade shift in which the wealthiest quintile reduced its business-asset share from 11 percent to 4.4 percent while increasing investment-property holdings from 10.2 percent to 14.2 percent. The same pattern of developer insolvencies appeared in 2019 when prices fell after the prior tightening episode.

Primary records show the RBA's August statement contained no reference to financial-stability concerns despite the documented contraction in transaction volumes and the insolvency of Bathla Group with A$3.3 billion in private-credit liabilities. Treasurer Chalmers' budget measure directly targeted investor demand, yet first-time buyers lack the scale to offset the withdrawal. The resulting price trajectory now aligns with the lower bound of historical Australian corrections.

Next data points are the RBA's November board minutes and the December quarter Cotality release. A further 0.5-percentage-point rate increase would place the cash rate above the post-GFC peak and extend the observed monthly price decline through the first quarter of 2024.