Sydney prices going backwards, but for how long?

Glenn Stevens, the governor the the Reserve Bank of Australia, gave a speech recently with what he advised had a fairly uncontroversial prediction. 

"There will be economic downturns from time to time," he said, adding if one turns out to be a big one, it will be very new experience for a lot of Australians.

"Close to half the workforce has never seen really high, nationwide unemployment."

He noted a lot of Australians had not ever seen how tough conditions can become "when virtually every industry and region is contracting.

"That they have not seen this is a good thing – in the sense that it results from the fact that we have not a really serious downturn for a long time now."

There have been many dips, but the last national recession was 1992. 

"But if one comes, it will be a shock," Glenn Stevens warned.

Spring provided a small shock for its eager sellers across Sydney as sale prices fell from their earlier peaks.

The stellar price achieved earlier this year for the inferior house down the street wasn't going to be secured for your better home. That was the anecdotal evidence that emerged during spring sales, then this week's more official recognition that Sydney had recorded its biggest fall in nearly five years. 

Sydney wasn't alone as CoreLogic RP Date suggest dwelling prices fell 1.5% in November across all the capital cities combined.

The data had Sydney houses down 1.5% during November and down 1.4% for the quarter to $950,000. For apartments Sydney was down 0.7% during November but up 0.6% for the quarter to $675,000.

CoreLogic's Tim Lawless noted the negative Sydney performance in November, which came after October had been a flat market, was likely to provide the Reserve Bank with a greater degree of flexibility in adjusting interest rates next year without as much risk of overstimulating the housing market.

Let's not forget that Sydney prices sit 48% higher than at the start of the now flagging price growth cycle.

Sydney dwelling prices are still up 12.8% on what they were this time last year too.

Ofcourse most owners sit out any such dips not having to sell - at a loss let alone the ignominy of taking less than the neighbours got.

I recall when banks were evicting then selling homes during that early 1990s recession and it was not pretty.

Currently only two per cent of homes resold in Sydney are selling at a loss for their vendor based on their initial purchase price, according to the CoreLogic RP Data Pain & Gain report.

The prestige Mosman and Pittwater, and the mortgage belt of Gosford, were the council areas that recorded the highest proportions of these loss-making resales.

The prestige market has been especially problematic. Recently a $10 million Mosman harbourfront sale occurred which was the same price as its 2011 sale, so no gain in four years for the bank chairman who sold.

In Woollahra $6 million was secured for a contemporary terrace which fetched $6.5 million in 2011 when bullishly sold by a former assistant Reserve Bank governor.

Property success can be a toss of the coin chance outcome, depending on your timing in the cycle, but also the recklessness of your purchase price.

Macquarie Reseach's controversial forecast that house prices across Australia could fall 7.5 per cent from the 2015 peak over 2016 and into 2017 has had some early impetus this spring, but let's see how 2016 kicks off.

This article was first published in the Saturday Daily Telegraph.