Sydney house prices are starting to fall – but where will the market settle?

Sydney House Prices Falling

The Reserve Bank, regulators and the government have got their wish. Property prices in the white-hot Sydney property market are starting to recede.

It was first illustrated by CoreLogic earlier this month, and now backed up by research from the Domain Group. The median house price across Sydney, according to Domain, is down 1.9 percent in the three months to the end of September.

The problem now for those regulators – and for first home buyers and others who are keen to get into the market – is how much further the market has to fall, before it settles. Like a puddle, if you don’t know how deep it is, you don’t want to jump in.

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The regulators also have to be careful, because they helped to engineer the fall. They did it in an attempt to deflate the housing bubble that was emerging around the Sydney property market especially. They did it by limiting the amount of finance available to investors; by clamping down on interest-only loans for first home buyers; by requiring banks to hold more capital against their loan books. All this caused lenders to raise interest rates for investors; while holding down rates for owner-occupiers.

But more happened. Chinese banking authorities made it tougher for their nationals and developers to move money out of the country. Australia also cracked down on illegal foreign buyers. Piece by piece the picture for lower property prices was created. And now it’s complete.

The signs have been there for months: slower new home starts; easing house finance. The fact that Sydney house prices are falling will be taken with a shrug in other housing markets in the country. Perth and Darwin have suffered falls of almost 20 percent; Melbourne is now established as the market with the strongest growth; Brisbane might now finally play some catch-up.

In truth, for much of last year it appeared that Sydney house prices had got out of whack with the rest of the country. It is natural, obvious, that some form of catch-up had to be achieved, especially with Melbourne’s long-term faster population growth-rate.

There’s no doubt that regulators, for the time being, will do nothing with their settings. For them, a period of time where Sydney prices ease – or go sideways – will be welcome. If banks and the economy can manage the slow-down, it will also ease the concerns of international banks and credit ratings agencies that have watched Australia with alarm in the past three years.

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And, if more Australians knuckle down and pay down their mortgages, rather than flipping from house to house with ever-increasing mortgage debt, it will also take some pressure over the nation’s world-leading debt-to-income ratio.

What Australia does not want, does not need, is a housing price collapse. That would trigger unemployment and possibly the first recession in more than 26 years. What Australia needs is for the regulators to be right in their judgment: that they can quietly take the steam out of the market, without triggering a bust.

Other related articles to property prices

04-09-2017 Interviewed  Tim Lawless, Head of Research, Corelogic RP Data titled ” Hobart is Best ”.

30-08-2017 Interviewed  Ben Zachariah, Harris & Silverman titled ” More valuable than property… ”.

01-08-2017 Interviewed  Tim Lawless, Head of Research, Corelogic RP Data titled ” Two-tier property market ”.

26-07-2017 Interviewed  Matthew Pollock, Economy and Housing, Master Builders Association titled ” Foreign home owners to halve ”.

12-06-2017 Interviewed  Peter Kell, Deputy Chairman ASIC titled ” Dangers of SMSF’s pushing people to buy property ”.

01-06-2017 Interviewed  Tim Lawless, Head of Research, Corelogic RP Data titled ” House prices fall for the first time in 18 months ”.

16-05-2017 Interviewed  Louis Christopher, SQM Research titled ” Vacancy rates could tighten despite a rise in rental vacancy ”.

04-05-2017 Interviewed  Penelope Siedler, Wife of Harry Seidler titled ” Australia Square – Penelope Siedler talks to Ross ”.

02-05-2017 Interviewed  John Symond, Executive Chairman and Founder of Aussie Home Loans titled ” John Symond talking interest rates ”.

12-04-2017 Interviewed  John Daley, Chief Executive of the Grattan Institute titled ” More cops use negative gearing than lawyers ”.

06-04-2017 Interviewed  Alana Chen,Vice President Moody’s Investors titled ” Mortgage Delinquencies Rising ”.

03-04-2017 Interviewed  Peter Kell, Deputy Chairman, ASIC titled ” ASIC cracks down on interest-only loans ”.

28-03-2017 Interviewed  Tim Lawless, Head of Research, Corelogic RP Data titled ” Top 25 Best and Worst Performing Areas Over The Past 25 years ”.

23-03-2017 Interviewed  Lindsay Partridge, the MD of Brickworks titled ” Property boom boosts profits – Lindsay Partridge Brickworks ”.

14-03-2017 Interviewed  Martin North, Digital Financial Analytics titled ” Mortgage stress ”.

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