WHAT happened to the housing market? House prices started falling, and all of a sudden the market has gone into hibernation.

Less buying is happening. Less selling is happening. Real estate agents must be sitting around, staring out the window and chewing their nails.

Despite huge population growth, property sales are at their lowest level in years, as this next graph shows. The black line has suddenly tipped downwards.

The reason for the slowdown is clear. With house price falls in the news, buyers are holding out for even lower prices. Why buy now when things could cost less later? At the same time, sellers are frightened of putting their house on the market unless they absolutely must.

The next graph shows clearly what’s happening in Sydney. There is an unusually low amount of stock being freshly put on the market, while a reasonably large amount of stock lingers out there unsold.

SPRING IS COMING

The current situation is an ugly combination for property sellers. But winter is not a true test of the property market. The truth will come in spring.

As you can see in the above graph, most people who want to sell put their property on the market in the second half of the year. That’s auction season, when new listings hit the market in a big tidal wave and buyers swoop.

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The current property stand-off is not so meaningful so long as there are only a few parties on either side. But spring will be different. The ranks of sellers will line up a hundred deep. And the buyers will amass on their side too.

Who will break cover?

Will it be the sellers, chucking their properties onto the market and crossing their fingers? Or will it be the buyers, finding their deposits finally amount to a decent percentage of the property price and going for it? We will soon find out. The five months until November are going to be a moment of truth.

MARKET BY MARKET

What I personally expect in spring is that the national average house price will fall. After all, some interest rates are rising as banks’ funding costs go up, and some property investors are being forced to sell as their interest-only loans can no longer be renewed.

But a national fall could mask very different results in different markets around Australia. As this next graph shows, the property situation is not the same in different states. Some states are adding new homes fast, and some states are adding population fast.

In NSW, population is rising fast (the orange line) but they have been building houses (the blue line) even faster. The rate of new dwelling investment is almost $6 billion every three months, while population growth has actually dropped slightly. That balance suggests that possibly, finally, Sydney’s prices could see downward pressure.

In WA, dwelling investment looks higher than history, while population growth is much lower. That can’t be good for house prices.

In Victoria, meanwhile, both population growth and dwelling investments are near record peaks. It is very hard to say what that might mean. But if we’re going to find out, we will find out in spring.

- Jason Murphy is an economist. He writes the blog Thomas the Think Engine or follow him on Twitter @jasemurphy