Property research group CoreLogic reported that the current downturn in the housing market could be approaching a new record, driven by “deep” falls in Sydney and Melbourne.
Since October 2017, when the national downturn commenced, residential property prices have fallen by 6.8 per cent. CoreLogic observed that the 16-month downturn in national home values is now the second-longest in history.
“Since 1980, there have been eight separate housing market downturns,” CoreLogic noted in its analysis.
“National housing market downturns have [been] generally fairly short-lived, with the current downturn of 16 months already the second longest, with the 2010-12 decline running two months longer than the current downturn,” CoreLogic noted in its analysis.
The research group also noted that the current downturn in national home values has been driven by sharp falls across Australia’s combined capital cities, which dropped by 8.6 per cent over the same period.
“By [the end of] next month (April), assuming the falls continue, this will be the largest downturn in the combined capital city index any time since 1980,” CoreLogic added.
While unable to predict when national housing values will pick up again, CoreLogic said that it expects the fall in residential property prices to “abate” in the back end of 2019.
“[Our] models show, at least for the short term, that values are likely to continue trending lower, with the rate of decline easing later this year and into 2020,” the research group predicted.
CoreLogic was also unable to predict the speed of the housing market recovery, noting that current mortgage conditions would stunt price growth.
“Historically, market recoveries from their trough have generally been fairly rapid; however, the recoveries have generally been driven by lower interest rates or a mix of stimulus such as the first home buyers grant boost,” it said.
“Although there is an expectation that interest rates may move lower, we probably won’t see the entire rates cuts passed through to mortgage rates, and the much tighter credit conditions are likely to limit any rebound in the housing market, particularly given borrowers are being assessed on their ability to repay a mortgage at a much higher rate (above 7 per cent).”