Can’t buy a house? Wait! Prices do fall!

We were shocked about four years ago when Sydney’s median house price went to $1 million. Well, this year it has spiked to $1.22 million! That’s a 20% rise in a year.

Some calculations say it was only 15%, but that’s huge anyway. For those out there hoping one day to get into the property market, the latest national trend for capital cities is a rising but slowing trend. And let me suggest (if history can be believed) that these rises one day will turn into falls! Yep, house prices do fall but in this country, they don’t fall too much. More on this in a moment.



What this table above shows is that would-be buyers in Darwin, Canberra and Hobart are even doing it tougher, percentage-wise, when it comes to house price rises. And some regions would be even worse for buyers, given that the regional average rise is 17.7%!

The median house price in Byron Bay was $1.4 million in May this year and in the region that this town dominates in real estate terms i.e. the Richmond-Tweed, prices were up 21.9% in the year to April. It would  be higher now!

Why is this happening? Try these factors:

  1. Interest rates are at an historic low.
  2. Jobs growth is at record highs.
  3. Supply of houses is too low.
  4. The pandemic and lockdowns have made people love their ‘safe haven’ properties.
  5. Aussies who love to travel overseas can’t service their tourist addictions, so they’re giving into their property addiction.
  6. FOMO (or the fear of missing out) is rife.
  7. And government assistance programmes have been ramped up to get buyers buying to help the building sector create jobs and keep small businesses in the sector viable.


But will this price madness last?

“The slowing in price gains from their peak in March is consistent with some slowing in auction clearance rates in recent months, as evident in the next two charts,” said AMP Capital’s Shane Oliver. “The slowing in price gains and clearances likely reflects a combination of deteriorating affordability and a bottoming in fixed mortgage rates.”

That said, even though Dr Shane sees a slowing rising trend “Housing finance commitments at record highs suggest more demand to come.”

But could prices fall? This is a question anyone out there, who either can’t afford a home or is missing out at auctions, must be asking and hoping for.

And the answer is ‘YES’ and it’s time for a history lesson.

In June 2017, I was shocked on my 2UE/Talking Lifestyle money programme to announce that Sydney’s median house price was $1,075,000! Suburbs that once were seen as dead-end places had average home prices over $1 million. And like now, FOMO was rife.

But that didn’t last. By September 2018, the median price had fallen to $900,000. And by December 2019, it was $865,000! That was a 20% drop in two years!

Why did this happen?

  1. APRA made it hard for banks to lend to investors.
  2. Interest only loans were discouraged.
  3. Bill Shorten, who looked like he’d win the election, promised changes to negative gearing and the capital gains tax discount.



The chart above shows that while the cash rate was stable at 1.5% (it’s now 0.1%!), look at the orange line for investor interest only loans. See how they spiked over 5%, while standard  variable home loan rates were 4.35%. But all interest rates were on the rise then.

The big lesson all would-be buyers need to learn is that prices can and do fall. And in some areas in Sydney over 2017 and 2019, they fell by more than 20%, while other areas fell less! Averages mask the big and small risers and fallers.

Simon Pressley, founder of, (who’s a regular on my Thursday night Switzer Investing show on YouTube) wrote a great piece on Sydney’s house price story in 2019.

He showed a middle ring house in Sydney in 1990 sold for around $155,000, but by 2017 that place was now a million dollar seller!

And Pressley made the point that over that time, there were three property booms but four downturns: 2005-06, 2008-09, 2011-12 and 2017-19


Source: Peter Switzer