Official data from the Australian Bureau of Statistics show that housing prices in Australia have fallen by a mere 0.2 per cent in the March quarter. But in spite of the decline being small, the nationwide picture masks something a little more worrying, with a number of cities showing more significant price falls.

House prices fell by 4.8 per cent in Perth since the first half of 2014. Prices are now back to the level of early 2013, which means that those who have bought a house in Perth in the last three years have either broken even or lost money entirely.

Similarly, Darwin house prices have dropped by 5.9 per cent since the June 2014 quarter and are now back to its level during the March 2012 quarter. Even Sydney house prices are falling are dropping, with a cumulative decline of 2.3 per cent in the past six months. This is an indication that the value of the mortgage is larger than the value of the property, translating to either zero growth or a loss.

Although a moderation in house prices is desirable for affordability purposes, this trend might have dire consequences, such as the destruction of an already fragile consumer confidence and an escalation in bad debt levels. Add to that the risk of a property glut as the result of the record boom in dwelling construction, a tightening in foreign investor lending, and restriction on foreign purchases, and this could emerge as a serious threat to the economy.

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