Since Sydney prices began to fall in mid-2017, a fall in Melbourne prices has seemed inevitable.
Four months after prices began to fall in Sydney, prices in Melbourne began to fall. So far, Melbourne house prices will fall for 11 consecutive months.
Melbourne`s median home price has fallen 4.9% in the same period.
The combined effects of regulatory intervention over the past few years are now fully visible in the state`s housing market.
With a series of taxes and other reforms, foreign investors have cut back, while domestic investors have struggled to raise money, making it harder for homeowners to apply for loans.
The credit crunch pushed large numbers of potential buyers out of the market and prices adjusted accordingly.
There is no doubt that Melbourne`s falling house prices have changed the market climate.
This brings great risks to the housing construction industry in Victoria, considering that housing construction is the key driver of the state`s strong economic growth in recent years, the reduction of housing construction means that it will bring economic risks.
The growth in construction activity in recent years has also led to strong growth in the construction workforce. More than 1/10 of workers in Victoria are now directly involved in construction activities.
And many other jobs, including manufacturing, services, retail and wholesale trade, depend on the huge demand generated by construction.
The good news is that there are still a lot of ongoing housing projects.
By the end of June, there were still 73,499 homes under construction in Victoria, a peak. In the short term, the situation will continue and construction activity will remain relatively stable, but there is growing concern about the prospects for the construction industry in 2019.
There are already signs that housing construction is beginning to weaken.
New home lending fell 9% in the third quarter from a year earlier, while approvals for new homes fell 5%. The figures for the last quarter of 2018 will fall, the source said.
Construction of new homes in Victoria could fall by 19% this fiscal year, according to HIA forecasts. This is a huge decline, but remains at a relatively healthy level in housing construction.
But the risk could lead to a further decline in construction activity.
The risks come from two main sources: whether the credit crunch will continue and key policy changes in the wake of state and federal elections. For example, reduce immigration or increase taxes, etc.
But while we have to pay attention to the risks, we cannot ignore the fact that despite the weak housing market, the state`s economy is still at a good level.
Official figures show that the state`s economy grew 3.5 percent last year, the labour market was strong, while unemployment was at its lowest level since 2011, creating many jobs and showing signs of rising wage growth.
The state`s population has continued to grow at a relatively healthy rate, although interstate and overseas immigration has slowed over the past 18 months.
The state`s vibrant economy is linked to the housing market, a stable market that is beneficial to communities and economies.
Policymakers and regulators must be cautious about possible future changes.
