Historical downturns in the property market - what can we learn

It is no secret that the present is a challenging time for the real estate market with six consecutive monthly rate increases this year, and the rate currently being at a 9 year high. History shows the real estate market ebbs and flows with booms and downturns. While now might be a tough time, it is not like we haven't lived it before.

With talk of more interest rate increases, and quickly, to curb increasing inflation, the talk among experts has been of a steep and lasting decline in house prices.

So, what can history teach us? Watch the video as Joanne Danckwardt of One Agency JD Property Agents talks about historical downturns in the Australian property market, and why housing downturns in Australia are not exactly new.

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As rates have risen, property price growth has slowed, with prices falling in some regions. Many buyers can no longer borrow the same amount as this time last year, and as rates continue to climb, borrowing capacities with be further impacted. Prospective buyers face higher borrowing costs, and also uncertainty of future repayment costs. All this is being reflected in the housing market, with demand declining as buyers try to wrap their heads around the fast increases. This, along with the constant negative news, has dulled buyer and seller confidence and we have moved into the next stage of the cycle – an adjustment cycle, after the extraordinary growth over the past two years – an amazing 34% increase cumulatively since the start of the pandemic in February 2020.

What happened during previous property market downturns?

Since 1990, there have been only five periods when year-ended property price growth has been negative. These declines have never been greater than 10% in year ended terms, with the following upturn being larger than the downturn. According to PropTrack’s Home Price Index, in recent history, Australia-wide downturns have lasted an average of between nine months and ten months.

In 2008/2009, the Global Financial Crisis impacted the Australia real estate market with a decrease of approximately 8.5%, while in 2011, property prices dropped due to global economic uncertainty and concerns.

In 2018/2019, Sydney property prices fell by 11.4% over 22 months. Interest rates were not rising, but this decrease was due to credit changes, when banking and borrowing measures were put in place.

With unemployment currently being at its lowest since 1974, and stronger wages growth, this could offset the increasing interest rates. Consideration should be given as household budgets are put under pressure with the increasing cost of living, coupled with rising interest rates. Household spending stability, wage growth, inflation, and interest rates are all factors that have an impact on property prices, along with the speed and depth of price decreases.

While property price cycles are nothing new, it is understandable why people feel nervous about the current price slowdown. Like many property owners, you may be wondering what is the right thing to do at this present time. Should you buy? Should you sell? Or should you wait? Can you really predict the market?

At One Agency JD Property Agents, we can provide you with advice, guidance, and results. We can help build a plan with you to overcome any fear, achieve sales results for you, assist with finding your next property to buy, and provide you with a range of strategic tailored real estate advice, and our rental services can help you to maximise your property returns.

If you're ready to discover the secrets to being ready to sell your home, download our free insider secrets to being ready to sell checklist.

YES, DOWNLOAD MY CHECKLIST

If you feel you could benefit from our experience with buying and selling, we’d love to hear from you. Simply reach out.  We hope that has helped you today. If you have any questions, or you know of anyone who may benefit from our real estate services, we’d love to chat. Our number is 0426 264 771. We look forward to talking to you soon.