ASX 200 Falls 6% Amid 10% Housing Price Drop Forecast
The S&P/ASX 200 index has lost 6% of its value since August 6, erasing all yearly gains. This decline coincides with a sharp revision in housing forecasts.
The S&P/ASX 200 index is down 6% from its peak on August 6. This drop erases all gains recorded this year. The decline follows a reversal in market conditions that previously supported record highs.
Brent crude oil prices have surpassed 109 US dollars per barrel. Global bond yields are reaching multi-year highs. The Reserve Bank of Australia is expected to hike cash rates. These factors weigh heavily on market sentiment.
Housing Prices Predicted to Drop 10%
Macquarie now expects national home prices to fall 10% from their peak. This forecast doubles the previous 5% decline estimate. The bank cites a sustained run of negative housing data.
Cotality reports its national index fell 0.9% in August. This marks the fifth consecutive monthly decline. Values are currently 3.6% below the March peak.
Sydney prices are down 7.1% from their February high. The decline is faster than the 2022-23 correction. Sales volumes are 15.5% lower than last year. Listings are 24% higher than year-ago levels.
Bank Earnings Face Downward Pressure
The S&P/ASX 200 Financials index is down over 10%. Analysts believe bank earnings forecasts are still too high. They argue the housing downturn is not fully priced in.
Westpac reported a 20% drop in mortgage application run rates. Owner-occupier applications fell 18%. Investor applications declined 26%. Commonwealth Bank and National Australia Bank both saw falls of around 15%.
Macro Reversal Drives Index Decline
The ASX 200 previously hit record highs on falling oil prices. Bond yields and interest rate expectations were drifting lower. These positives have now reversed. The Australian Bureau of Statistics reported a 34.1 billion dollar drop in housing stock value in the June quarter.
GN auto markets/indices notes that the damage may extend beyond banks. The total value of Australia's housing stock fell to 12.7 trillion dollars. This was the first decline since September 2022. The financial sector remains the largest component of the index.
