According to the wonderful Corelogic house price series, Sydney house prices have grown by 0.00 per cent over the past year.

This annual result masks what are some weaker trends for the Sydney housing market including the fact that prices have fallen 3.8 per cent from the September 2017 peak. In other words, a dwelling that was $1,000,000 in September is now worth around $962,000, a drop of $38,000.

Is this a problem?

Not yet.

Could it become a problem?

Maybe – it is too early to be sure.

Suffice to say, falling house prices are not just a problem for the borrowers who entered the market at the peak of the cycle, but also for the banks that lent them the money. A 3.8 per cent decline after 7 or so years where prices rose 100 per cent is small beer.

But if the falls continue, and declines of 5, 6 and 7 per cent or more become common place, a few waning signals will be out there for the economy.

For the RBA, raising interest rates at a time of falling house prices will be a big no no. A housing crash is still the most likely cause of the next recession in Australia, albeit, for now a very remote possibility. The RBA knows this, even if it does not say as much publically.

Which is why any further weakness in house prices not only kills the prospects for interest rate hikes, but adds to the case for interest rate cuts.