Since the early 1980s, Australia has experienced seven national housing market corrections and one official recession, according to Corelogic and Australian Bureau of Statistics data.
While another housing slowdown is underway, the outlook on prices -- and the broader economy -- remains unclear.
“We have seen (the housing market) move into correction and for the consumer it’s obviously a touchy subject and so we’re all over this one trying to assess…how shallow or deep or long – how this one’s likely to pan out,” Matthew Hassan, a senior economist at Westpac, says in a podcast.
“(But) I think the notion that we don’t see price corrections, or conversely that price corrections are a disaster (is incorrect). You can have fairly benign price corrections, we’ve had several.”
Corelogic this week said Australian dwelling values fell 0.2 per cent in June, marking the ninth consecutive month-on-month fall and taking the decline since the September market peak to 1.3 per cent.
It added that for the 2018 financial year, combined capital city prices declined 1.6 per cent, heavily impacted by Sydney’s 4.5 per cent decline that offset a notable increase in Hobart, and smaller gains in Canberra, Adelaide, Brisbane and Melbourne. It marked a reversal of the 9.6 per cent increase in combined city prices in the 2017 financial year, led by double digit advances in Sydney and Melbourne.
But what differs in this correction compared to prior ones is that it hasn’t coincided with rising interest rates.
In the podcast, Mr Hassan talks through what’s driving the correction, moves in different markets, the affordability conundrum and the outlook for the Reserve Bank cash rate, which has been on hold at a record low 1.5 per cent for almost two years.
The views expressed in this article and podcast are those of the author and participants, and do not necessarily reflect those of the Westpac Group. It is general commentary and it is not intended as financial advice and should not be relied upon as such.
By Ben Young
Head of Fraud and Financial Crime Insights