- Australian home prices have fallen 0.8% over the past year, according to CoreLogic.
- In comparison to prior downturns, this one is looking pretty tame so far.
- While few suspect the downturn will turn into something more sinister, whenever the next price upswing begins, it’s likely to be fairly mild.
For all the negative headlines about Australia’s latest housing market downturn, it’s actually been quite tame — so far — compared to those witnessed in the past.
From Macquarie Bank, it shows nationwide price measures from CoreLogic and Australian Property Monitors dating back to the start of 2004.
On an annualised monthly basis, the recent downturn has been comparatively small, slightly larger than the one witnessed a couple of years ago but far smaller than those seen either side of the GFC and the mid-2000s.
If this is the “popping of the bubble”, setting the stage for one-almighty economic downturn not seen in Australia in decades, it’s looking like a bit of a fizzer for the bears out there.
While such an outcome could play out — and it is a risk — few mainstream forecasters believe such an outcome is likely in the absence of an unexpected economic shock abroad, lift in unemployment, or steep drop in population growth domestically.
Given the risks, such an outcome would be enviable given the trajectory prices were on before the latest downturn and subsequent buildup in household debt.
Should the broader consensus be proven right, it begs the question what the next price upswing may look like, whenever it occurs.
Will it be at breakneck speeds as witnessed in the past, or something far slower and muted in nature?
Though individuals will have different views, it’s hard to see a repeat of prior cycles.
For one, official interest rates from the RBA are already at record lows, with most expecting the next move will be higher. And with short-term funding costs for lenders remaining at elevated levels, we’ve already seen some smaller lenders deliver out-of-cycle mortgage rate increases to borrowers.
Throw in the likelihood that tighter lending standards will remain in place, coupled with record levels of home construction, subdued growth in household incomes and continued capital controls restricting many Chinese citizens — the largest source of foreign demand — from purchasing Australian property, and the headwinds for price growth are looking fairly stiff at present.
The next upswing — whenever it begins — looks like it will be a hard slog rather than a spectacular rebound seen so often in the past.
Opinions expressed here are the sole opinion of the author and may not represent the opinions of Business Insider.
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