The attached note takes a look at the housing downturn and the outlook for home prices. The key points are as follows:
Australian home prices fell another 1.6% in August and are now down by 3.5% from their high, based on CoreLogic data.
Rising mortgage rates are the main driver and there is likely more to go. We continue to expect a 15-20% top to bottom fall in home prices out to the second half of next year, followed by a gradual recovery.
There are three reasons why this home price downturn will likely be deeper and the recovery slower than in past cycles: higher home price to income levels; higher debt levels; and an end to the long-term decline in interest rates.
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