As Australia continues to suffer price declines, one question remains: how long will the current market downturn last?
Home prices in Australia have declined by 2% in August, marking the 11th consecutive month of decline. In a Business Insider Australia report, Capital Economics chief Australia and New Zealand economist Paul Dales said while it may seem that the declines are becoming smaller, data suggests the otherwise.
“After seasonally adjusting the 0.4% decline in house prices in August on the eight capital cities measure to take into account the normal improvement in price trends ahead of the spring selling season, prices fell by 0.6%,” he told Business Insider Australia.
Dales argued that the pace of decline is similar to the preceding month and is actually still significant when adjusted to historic patterns. This is particularly true in the cities of Sydney and Melbourne.
For instance, Sydney’s 0.3% monthly price fall is actually worse after a seasonal adjustment, given that it translates to a 0.9% fall. In fact, this is the biggest fall in 10 years.
“Prices in Sydney have fallen by 6.2% from their peak and by an annualised 7.9% in the past three months,” Dales said.
The economist furthered that the current downtrend has the potential to be the longest and deepest in Australia housing market’s history.
“But with the full effect of the tightening in credit criteria and recent hikes in mortgage rates yet to be felt, we suspect this downturn will end up being both the longest and deepest with prices falling by 12% over four years,” he said.