Banks might offer cheaper and cheaper lending rates, but if you don't have a job you can't service the loan.

If the cycle is dominated by investors than it's less vulnerable. — Bill Evans, Westpac chief economist

Worse, if you have a mortgage and you lose your job then you might have to sell, and that selling creates the downward spiral in prices.

Sometimes the knock-on effect is not so bad because there may be more investors in the market who can absorb some of the losses.

Owner-occupiers dominate

But if there is a growing proportion of owner-occupiers sitting on mortgages and they lose their job, it creates a higher risk of price falls. Unfortunately, that is the case now.

New owner-occupier home loan commitments are growing at an annual rate of 26.9 per cent, with $15 billion in new loans taken out in January. Annual investor home loan growth is 14.7 per cent, with just over $5.7 billion in new loans taken out in January.

More concerning is that in January this year the number of owner-occupier first-home buyer loan commitments reached its highest point in 10 years.


Westpac chief economist Bill Evans has seen plenty of cycles and knows that home prices are all about jobs.

"If the cycle is dominated by investors than it's less vulnerable. I don't feel as though they are as exposed as first home buyers and owner occupiers."

Unemployment to 9pc

Like many economists, Mr Evans still thinks unemployment will reach 9 per cent from its current level of 5.1 per cent despite the federal government's $130 billion wage subsidy. Before the wage subsidy he expected 17 per cent unemployment.

While unemployment might be the main driver in this property decline, the market also needs to think about the total shutdown to foreign buyers – and the disappearance of tourists and students.

When announcing the first quantitative easing package in Australia's history on March 19, Reserve Bank governor Philip Lowe knew what was coming for property and he was guarded.

"I think it's quite likely that over the next few months there will not be many transactions in the housing market," Dr Lowe said.


Soon after, home auctions were cancelled.

But history could have told you how quickly the volume of property deals falls away following a sharemarket crash. The change in sales volumes measured in a three-month rolling average dropped 5.4 per cent in the six months following Black Monday in 1987.

They might have rebounded 60 per cent 12 months on, but that didn't make a difference as prices fell away soon after.

"The uncertainty that most people in the community fear or feel is likely to see them out of the housing markets, so housing prices will be what they will be over the next few months," Dr Lowe said on March 19.

"And if I am right you might see a recovery by the end of the year as people feel confident again to go back into the market."

Most people will hope he is right.