Sydney property prices are tipped to fall as much as 10 per cent over the next 12 to 18 months by some of the country’s leading property data providers and researchers.
Double-digit price falls may sound concerning to home owners who have only ever known rising values, but even this “worst-case scenario” is not a crash.
The Sydney market peaked in August, when the median dwelling price hit $909,914, according to CoreLogic. It has since come off 2.2 per cent.
From a current median price of $895,342, a 10 per cent decline would equate to about $90,000.
This should not concern the majority of home owners.
Prices would still be above $800,000 – a threshold broken only in October 2016 after four years of booming real estate prices.
To bring prices back to where they were before the boom – $520,000 in late 2012 – the fall would need to be closer to 42 per cent.
While a decline in price is always welcome to those struggling to enter into the market, first-home buyers were finding it tough even back then.
In early 2016, first-home buyers were already at their lowest levels in more than a decade as a result of the median dwelling price nudging $800,000. Hardly a picture of affordability.
For most home owners, who have held their home on average for about 10 years, it’s unlikely a downturn of the size predicted will register as anything other than a blip.
Typically, property prices have been known to double in every seven to 10 years in capital cities after a strong market cycle. So home owners who stay put for lengthy periods should see their property value increase in the long run, irrespective of short-term hiccups.
In the latest quarter, prices have already pulled back 2.1 per cent. For perspective, at the height of the boom, Sydney’s property price growth once totalled more than 17 per cent in a year.
The home owners with the most to lose if these forecasts come to pass are those who bought in the last half of 2017, whose property values have fallen ever since, based on the CoreLogic data.
If they bought in with a small deposit, it’s easy to see how they’d feel the pinch.
Thankfully, CoreLogic’s predictions for Sydney’s labour market are rosier, meaning those who are faced with negative equity – where the property is worth less than the mortgage – should still be able to batten down the hatches and afford their repayments. If this changes, then there is much more to be concerned about.