The latest residential housing price figures released on Tuesday by the Australian Bureau of Statistics show that while across most capital cities prices continued to fall in the June quarter, the speed with which they are falling has for the most part slowed. But while it appears that house prices will soon begin to go up, without similar rises in household incomes affordability will get worse, as will the danger of another housing price bubble.

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The start of this year was a particularly bad one for house prices – for the first time since 2011 house prices fell in every capital. The second quarter saw a slightly better result but highlighted the continuing weakness in the market. All capital cities except Hobart and Canberra saw house prices fall. But for all cities except Adelaide and Perth, the pace of the falls was slower than it was in March:

This reflects my assessment in June that it looked as though we had reached the bottom of the housing market. Yes, prices would still fall slightly, but the increasing pace of those falls was over and, by the end of the year, we should be seeing price growth across the country.

But the falls are such that even with some increases, house prices for the most part remain well below where they were a year ago.

In Sydney the average residential house price in June was 9.6% below where it was last year, while in Melbourne it was 9.3% down:

Only in Hobart is the average house price above where it was 12 months ago.

The overall falls combined with the slowing of the price drops is not surprising, given the improvement in the housing finance figures, which are a very good indicator of where the housing market is headed.

The increase of people taking out home loans suggests that prices should start to pick up in this second half of the year:

But, because of the large price drops, we look to be still some way off of prices returning to anywhere near where they were:

For many people that news will be welcome.

While it generally is better for the economy for house prices to grow than to fall, given the level of price increase since December 2010, prospective house buyers – especially in Sydney and Melbourne – will not be overly eager for another fast pick-up:

House prices in Sydney are now about 56% above where they were at the end of 2011; in Melbourne they are 38% higher.

By contrast, overall inflation rose just 15% in that time and private wages grew by 19%. Even electricity prices in Sydney have risen by 35% in that time.

The median house price in Sydney in June was $875,000 – well down on the $1.05m record set two years earlier in June 2017. The median Sydney house price is now back around the level of early 2016.

And yet, because the boom in house prices occurred later in other states, all but Perth and Darwin (which both suffered from the end of the mining boom) have median house prices higher than they were three years ago:

All this means the affordability of houses in most cities remains below where it was in 2016 and, for all except Perth and Darwin, well below where it was in November 2011 when the Reserve Bank began cutting interest rates.

Affordability is a tough thing to measure given the multiple ways to measure income. But if we use the level of household disposable income per capita, which as I have noted has been flat in real terms since 2010, then we can get a decent gauge on how the price of houses has moved relative to household incomes (as opposed to other measures such as male full-time earnings or wages).

The current annual household disposable income per capita of $48,956 is just 13% above where it was in 2011. Thus, for a household in Sydney, the level of median house prices has gone from the equivalent of 12.3 years’ worth of the average per capita household disposable income to now being 17.9 years. Yes, it has fallen from the 22 years reached in June 2017 but, even after the fall, it is around a level equivalent to that during the early 2000s price boom:

This is where our weak income growth really starts to have an impact.

You would hope that with house prices now back to levels of three years ago that affordability would be markedly better than then. But because income growth has been so weak, there is little difference in affordability between now and in 2016.

And in all cities except Perth and Darwin it is worse.

This is now the base. If house prices start to go up again, as looks likely, it means that affordability will only get worse unless household incomes begin to rise.

But, as the head of the Reserve Bank noted, rising house prices in a period of weak income growth is inherently unsustainable – and that is a worrying thing for an economy such as ours which relies so greatly on household wealth derived from the value of the family home.

• Greg Jericho is a Guardian Australia columnist