Falling turnover, not prices, is the bigger housing crash

Most fanfare and concern have focused on the sharp decline in Australian dwelling values, which have fallen 6.8% from their April peak across the five major capital city markets.

At the current rate of decline, home prices will have recorded their steepest decline in more than 40 years before Christmas, with HSBC forecasting a 13% peak-to-trough decline across the combined capital cities.

The sharp decline in dwelling prices will likely reduce consumer spending through the ‘wealth effect’, which occurs when households pull back on spending because they feel poorer.