- Sydney and Melbourne home prices have fallen 2% and 0.6% respectively so far in 2018.
- Compared to prior downturns, the latest price correction has been far modest and shorter than most seen in the past.
- Price decline in both cities appear to have moderated in recent months.
Home prices in Sydney and Melbourne are now starting to decline following years of strong growth.
According to CoreLogic, the median dwelling price in Sydney, Australia’s most expensive housing market, has fallen 2% this year, adding to the modest losses recorded in late 2017.
Many are now pondering as to what will happen next?
Some think further losses are on the way as tighter lending restrictions, affordability constraints, weak household income growth and increased supply act in tandem to keep prices under pressure.
Others, however, suggest the recent weakness is unlikely to last for long, pointing to strong employment and population growth as factors that will help to support prices in the near future.
While past performance is not indicative of future returns, if history is any guide, the recent weakness could extend for some time yet.
As seen in this chart from Cameron Kusher, Research Analyst at CoreLogic, posted on Twitter today, the latest downturn in Sydney is both shorter and more modest than most price corrections seen in the past.
Although each was driven by different factors, be it higher interest rates or global factors, it suggests the recent downturn is not all that unusual.
The same could also be said for Melbourne’s latest price correction, far smaller and shorter than that seen in Sydney to this point, with the latest decline very modest in comparison to those seen in the past.
Right now, the declines in both Sydney and Melbourne appear to be moderating, especially in the former, compared to those reported late last year and in early 2018.
While that suggests that prices may soon start to level off, or even increase, in the months ahead, as both charts clearly demonstrate, that’s no guarantee that the bottom of the price cycle has been hit.
You can follow Cameron on Twitter here.