Sydney home values may have started to fall but it would take record price drops to erase the equity gains homeowners have made over the last two years.
PropTrack data released Wednesday showed Sydney home prices remain 32.6 per cent higher than they were in the early stages of the Covid pandemic in April 2020.
The same month was when on-site auctions and open homes had been banned as part of health measures and represented the last trough in the market, with March 2022 the most recent peak.
Prices fell by small margins of less than a per cent over May and April this year, according to the PropTrack monthly price index.
The spectacular price gains over 2020 and 2021 would mean that home prices could still be well above their early pandemic levels even if they were to drop by the level forecast by some banks.
ANZ recently forecast a 20 per cent fall in Sydney home prices over the next two years, while Commonwealth Bank predicted an 18 per cent drop over the same period.
Other forecasters have predicted a 15-20 per cent fall on the back of additional interest rate rises, declining homebuyer participation and falling market sentiment.
Price falls of larger than 20 per cent would be unprecedented in recent decades.
The last major housing downturn that stretched from late 2017 to early 2019 saw Sydney prices decline by a total of about 15 per cent.
PropTrack senior economist Eleanor Creagh said recent price falls needed to be considered in the context of the last two years.
“It’s been an extraordinary period,” she said. “Prices went up by the third highest rate in 150 years.
“Even if prices were to fall more, the share of homeowners in negative equity would only increase a very small amount since so many borrowers and sitting on substantial equity.”
PropertyBuyer director and former president of the Real Estate Buyers Agents Association Rich Harvey said it was worth noting that house prices could swing wildly in the short-term but the general trajectory over the long-term was up.
“Prices do fall and we’re seeing that now, but over the long-term they always go up,” he said.
PropTrack reported that recent price declines were partly due to stretched affordability, with the median house in Sydney estimated to now be worth over $1.25 million.
There has also been an increase in new listings since the April public holidays, which gave buyers more choice, PropTrack noted.
Meanwhile, demand has been moderating. Real estate listings in May attracted 14.6 per cent fewer views compared to the same period last year.
With the increase in supply and drop in demand, properties are taking longer to sell. The median days properties were listed for sale on realestate.com.au before selling was 31 days. A year ago, it was 24 days.