What makes the current housing downturn different?

As the housing market goes through the downturn phase in the property cycle, it pays to know how it differs from similar slumps in the past.

Citing an analysis by UBS, Business Insider Australia said the recent property prices decline in Australia are relatively restrained so far.

In fact, prices across Australia are down by only 2% since September 2017, significantly lower than the average decline of 4% over the past seven downturns since 1982.

UBS also noted that the current downtrend may persist longer, as it has already lasted for almost a year, while previous declines only lasted an average of 12 months.

There is also one particular factor that will be different this time: In the past, the end of a downturn signals a rate cut from the central bank. With the Reserve Bank of Australia already holding the official interest rate at its lowest level, it is unlikely that it will slash the rate further.

"Lower interest rates quickly boosted affordability, driving a sharp increase in demand. With lenders willing to provide credit, it saw a rebound of home loans, which then quickly lifted prices," economists at UBS said, as quoted by Business Insider Australia.

For these economists, the central bank and the banking regulator are not exactly eyeing to give the property market a boost this time around.

In fact, RBA governor Philip Lowe recently noted of the slowdown as not "necessarily a bad thing". On the other hand, the Australian Prudential Regulation Authority (APRA) is expecting banks to further tighten their lending standards.

With the rates unlikely to move further down and the possible credit supply restrictions, house price appreciation would probably be dubious.

“Given a likely lack of policy easing in the coming cycle, home prices will probably keep falling into next year, seeing the longest downturn in many decades," UBS said.