6 consecutive months of falling house prices in Sydney Housing, a repeat in December could see the largest scale downturn since the late 80’s, early 90’s.
It’s the largest and the priciest property market in Australia, but Sydney’s home prices continue to fall reporting a 16 month streak of losses.
Data analysts CoreLogic released their November analysis documenting a 9.5% decline from nominal prices resulting in the steepest downturn recorded in the past 30 years.
If prices continue to fall again this month, as early trends are indicating they will, the current downturn will replace the 89-91 period as the largest in nominal terms over this period.
Historical indicators as to how quickly we can expect a recovery suggest it could be sometime before we see a return to the previous peak seen midway through last year.
The decline of 1989 took 2 years to hit its lowest point whilst taking nearly 3 to reach a new peak, with less drastic downturn’s often taking equal time to rise as decline.
With tighter lending standards looking to remain in place, likely far stricter than the past and interest rates at record lows unlikely to be cut further given the precedent set by policymakers, it appears it will be some time before prices in Sydney return to the previously recorded highs.
In previous downturns the Reserve Bank of Australia (RBA) used rate cuts to support falling home prices, allowing lenders to avoid increasing repayments whilst taking on more debt.
We are dealing with a new situation in which house prices aren’t going to receive support from lower borrowing costs or more lenient lending standards at the very least in the near future.
“Reserve Bank of Australia (RBA) used rate cuts to support falling home prices”
This suggests a need to be prepared for a long uphill battle when the upswing begins with the growth of the market likely to be reliant on factors such as a reduction in new supply, lower levels of listings, population growth and improvement in household incomes.
Given the differing circumstances of previous downturns, there is a very real possibility of recovery times surpassing that of those seen in the mid 1990’s.