Michael Hurcomb/Corbis via Getty Images

Sydney’s housing market has entered a downturn with the median price in the city falling 5.4% over the past year.

It’s wiped tens of thousands of dollars off the median value, with some declines larger than others.

House prices have fallen by 7%, outpacing a 1.6% decline in unit values.

Putting the decline in house prices into perspective, from August last year, the median price has fallen from $1,079,399 to $998,270, leaving it below the $1 million mark for the first time since October 2016.

Big numbers.

However, in the scheme of things, the current downturn in Sydney looks not all that unusual compared to others in the past.

CoreLogic

The chart above from Cameron Kusher, Research Analyst at CoreLogic, shows it’s currently middle of the pack in terms of speed and size, at least so far.

Nothing unusual then, so move along.

Not quite.

While the speed and scale of the downturn is similar to previous ones, rather than being driven by higher mortgage rates, this one has largely been caused by a tightening in lending standards, as evidenced by the RBA cash rate remaining at a record-low 1.5% since August 2016.

Given a clear reluctance from the RBA to cut interest rates even further, and the likelihood that lending standards won’t be relaxed anytime soon, it does beg the question as to what will be the catalyst to spark the next upswing in the Sydney market?

The cash rate is already at record lows, investor activity — both from home and abroad — is far softer than it what it once and there’s an abundance of new housing supply on the way, all at a time when household income growth is still weak, albeit improving modestly.

Given that backdrop, it’s little wonder why so many think it’ll be a while yet before prices begin to bottom.

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