Sydney’s current property downturn is the sharpest in more than two decades with house prices falling 14.3 per cent from their mid-2017 peak.
According to Domain's 2019 House Price Report for the first quarter, the drop in housing prices is continuing without any real sign of a bottom being reached, with house prices in Sydney now back to early 2016 levels and units back to mid-2015.
Sydney, which suffered the nation's biggest yearly slump, saw residential prices in the NSW capital fall 7.8 per cent in 2018, the biggest 12-month fall any capital city has recorded in the past 15 years.
Price declines in Sydney's current downturn have occurred about twice as quickly as average.
The longest downturn recorded was 23 quarters during the first half of the 1980s, which resulted in a total real house price decline of nearly 34 per cent.
“Sydney’s current property downturn is the sharpest in more than two decades,” Domain senior research analyst Nicola Powell said.
“It is yet to surpass the duration of the 2004-06 slump but it is coming close to being the longest.”
Despite the downturn Sydney's remains the most expensive place to buy a house with median house prices at $910,000 nearly 30 per cent higher than in Melbourne, 69 per cent higher than Brisbane and nearly double that of house prices in Adelaide and Hobart.
While this may be the case, many analysts have flagged that Sydney has probably not even reached the halfway point of its downturn.
Ratings agency Moody’s has just forecast that Sydney house prices will drop by 9.3 per cent this year, revised from its January prediction of 3.3 per cent.
“Despite further price deterioration to house and unit prices over the quarter, the rate of decline has eased from the quarterly falls recorded last year,” Powell said.
“House prices are now back to early 2016 and units back to mid-2015.”
“However, house prices are 30.2 per cent higher and unit prices 20.7 per cent higher than five years ago, providing many homeowners with substantial equity gain.”
While the Sydney housing market has been experiencing a downturn, affordability is still at a historic low.
“Sydney remains a buyers’ market, although the year has started in a better place than last year ended,” Powell said.
“Despite lower auction volumes, clearance rates have risen from near historic lows.”
Buyers are still not rushing to purchase property before the next federal election — especially not in Sydney, where the outlook for house prices just got worse.
Analysts predict that the "early recovery scenario" would be more likely if the Coalition government was returned to power, while a Labor win, could see a rush of investor buyers seeking to get in ahead of the changes and lock in the tax benefits that would be guaranteed to them as existing investors.
“A change to monetary or fiscal policy could provide a sugar hit to the Sydney housing market,” Powell said.
“Inflation has virtually disappeared, providing a heightened prospect of a rate cut from the Reserve Bank.”
“Even if the cut is not passed in full to consumers, the cost of debt will be lower — a likely spark for market activity.”
“It is doubtful, though, that the stimulus will have as much effect as previous rate cuts, considering the assessment benchmark for a borrower’s capacity to service a home loan sits higher than current mortgage rates.”