Earlier this week, property research group CoreLogic published its latest findings, which showed that national dwelling prices slipped by 0.4 of a percentage point in May — the first monthly decline since June 2019.

Five of Australia’s major capitals recorded month-on-month declines, triggering a cumulative fall of 0.5 of a percentage point, while combined regional market values were stable.

Despite it being the first fall in nearly a year, CoreLogic head of research Tim Lawless was optimistic, stating that weakness in the property market off the back of the COVID-19 crisis was “milder” than initially expected.

AMP Capital chief economist Shane Oliver has also revised his forecast to reflect a softer landing for the housing market.

Mr Oliver was initially projecting a peak-to-trough decline in dwelling values of up to 20 per cent. However, according to the economist, such a scenario is now improbable.

“Our worst-case scenario for a 20 per cent decline in prices and those of others seeing 30 per cent–plus falls are unlikely, thanks to support measures and the earlier reopening of the economy,” he said.

“To get these worst-case scenarios would require a ‘second wave’ of coronavirus cases [and] so a renewed shutdown or another down leg in the economy in response to a surge in bankruptcies.”

But Mr Oliver noted that a prolonged downturn in the property market is still on the cards amid rising unemployment and expectations of a deterioration in credit quality.

“[Further] falls in prices are still likely, as ‘true’ unemployment (to become clear after September) remains high for several years, government support measures and the bank payment holiday end after September, immigration falls and likely government measures boost housing construction,” he added.

As a result, Mr Oliver’s new base case is for national average prices to fall by between 5 and 10 per cent throughout 2020 and into 2021, with Australia’s largest capitals to bear the brunt of the downturn.

“Sydney and Melbourne are likely to see 10 per cent falls as they are more exposed to immigration and have higher debt levels, whereas Adelaide, Brisbane, Perth and Hobart are only likely to see small falls, and Canberra prices are likely to be flat,” he predicted.

“This may be seen as a reasonable outcome in terms of making housing more affordable but without posing a big threat to the economy — via a downwards spiral of falling prices and negative wealth effects on consumer spending — at the same time.”