Housing market upswings eclipse downswings
Image – Canva
  • Domain has released its latest analysis of Australia’s combined capital house price cycles in the last 30 years
  • The report highlights that upswings tend to be more significant than sibsequent downswings
  • The findings support the perspective that timing the market is less important than time spent in the market

Upswings in the Australian housing market tend to be followed by softer downswings according to Domain’s latest analysis of Australia’s combined capital house price cycles in the last 30 years. The finding suggests Australians should not expect a sharp decline in the housing market.

Nicola Powell, Domain Chief of Research and Economics says there are lessons that can be learnt from previous price cycles

“There’s no denying that economic shifts and global influences are making their mark on consumer sentiment and subsequently, the Australian property market.

“When property prices fall it can understandably make many Australians feel uncertain about their property journey, however, it is important to remember that property has historically moved through upswings and downturns,” Dr Powell said.

Time rather than timing

Domain’s research highlights that investors should not be preoccupied with buying or selling at the right time in a housing cycle. Rather, they should consider how long they spend in the market.

“Our analysis of directly comparing the steepness and duration of an upswing and subsequent downturn since 1995 supports the argument that it is not timing the market that is important, it is the time spent in the market that counts.”

Nicola Powell, Domain Chief of Research and Economics

nicola powell
Dr Nicola Powell, Domain. Image – LinkedIn .

The study found that in Australia the duration of an upswing tends to be longer than the downturn which follows. This means price gains outweigh subsequent price declines Dr Powell explained.

“Downturns have historically been shorter and less severe compared with the preceding upswing,” she said.

Premium price points

What does this data mean for the current downturn?

“Premium-priced areas tend to lead price cycles, and while they may appear more vulnerable during a downturn, they see greater rates of price growth during the upward growth phase. This also means that when we move into a recovery phase, it will be evident first across the premium price-point,” Dr Powell said.

According to her, this is evident in the most expensive areas of Sydney and Melbourne.

“All downturns over the past three decades had an annual decline that peaked at less than 10%. The decline was minor relative to the higher rate of incline that had preceded it. In comparison, all upswings had an annual increase that peaked above 10%, apart from the pandemic-interrupted upswing of 2019-20.”

It should be noted that the current downturned market will not conform entirely to historical expectations.

“A difference between the current downturn and its predecessor, is that interest rates are rising, increasing the cost of a home loan and reducing borrowing capacity at a time when living costs are soaring.”

“While this might mean a bigger decrease in prices than we have historically seen, this analysis suggests that it is unlikely we will see a return to a pre-pandemic price,” Dr Powell said.


Disclaimer: This article contains general information and should at no time be considered advice to the reader. The reader should always verify their situation with the relevant certified professionals before taking any further steps. 

You May Also Like

Australian building costs have continued to soar, but has your insurance cover kept pace?

MCG Quantity Surveyors analysis found underinsurance could cost homeowners over $100K to replace a property, with the issue even more profound in the commercial property sector.

When will Australian property prices fall? One major challenge continues to prop prices up

Property prices are up by over 35% across the country since Covid, and while not the same story in each city, that’s little solace to prospective buyers pulling their hair out.

A window of opportunity could be open for savvy Australian property investors, but time is ticking

One expert has noticed investors are on the move while there’s less competition and fewer buyers in the marketplace.

Why Aussie property buyers aren’t waiting for rate cuts anymore

A surge in home loans shows buyers aren’t waiting for interest rates to drop before taking the plunge.