Sydney's housing downturn looks set to become the largest in at least 3 decades

Brett Hemmings/Getty ImagesSYDNEY, AUSTRALIA – DECEMBER 12: Patrons enjoy a water slide at the opening of Sydney theme park, Wet’n’Wild on December 12, 2013 in Sydney, Australia. The new water park, featuring 42 slides and attractions, replaces Wonderland which closed in 2004.
  • Home prices in Sydney have fallen for 16 consecutive months, leaving median prices down 9.5% in nominal terms.
  • Should prices fall again in December, the current downturn will replace that seen in the late 1980s and early 1990s in terms of scale.
  • With tighter lending standards likely to remain in place, and official interest rates already at record lows, it could be quite some time until prices in Sydney return to the previous cyclical peak.

Home prices in Sydney, Australia’s largest and most expensive property market, have fallen for 16 consecutive months.

As seen in the chart below from CoreLogic, at this point in the price cycle, nominal prices have already fallen by 9.5%, making this downturn the steepest in the past three decades.


Should prices fall again this month — and it looks like they may given the early trends in CoreLogic’s daily index in December — the current downturn will replace 1989-91 as the largest in nominal terms over this period.

That latter just happened to occur before Australia’s last recession.

CoreLogic hasn’t included downturns prior to the 1980s due to a lack of reliable data.

As for when prices will stop falling, and then begin to lift, this next chart suggests it could be quite some time until Sydney prices return to the previous cyclical peak seen midway through last year.


Lending standards have been tightened, and are likely to remain far stricter than in the past, while official interest rates from the Reserve Bank of Australia (RBA) currently sit at record lows, and are unlikely to be cut further given recent form from policymakers at the bank.

In previous price downturns, RBA rate cuts were often used to support home prices, allowing borrowers to take on more debt without a subsequent increase in mortgage repayments.

Given valuations are unlikely to be provided support from lower borrowing costs or looser lending standards, at least in the short-to-medium term, that suggests when the cyclical upswing in Sydney’s housing market begins, it will be driven by other factors such as population growth, a reduction in new housing supply, lower levels of property listings or an improvement in household incomes.

With that backdrop, the length it takes Sydney prices to return to previous highs could well surpass the recovery seen in the mid 1990s.

One way or another, it looks like it will be a long, hard slog for Sydney property valuations ahead.

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