The Australian house price slump has deepened further with latest stats showing Sydney prices now down by nearly 14 per cent from their peak.
Latest figures from CoreLogic show Sydney prices have fallen 13.9 per cent since their peak in July 2017 and Melbourne prices 10.7 per cent since its peak a few months later in November 2017. The national prices fall is now 7.4 per cent.
Nationally, the pace of declines was slowing but the downturn had become more widespread, Bloomberg News Reported.
Prices fell in six of the eight state capital cities last month, with only Hobart seeing gains and Canberra flat.
The upcoming Federal Election appeared spooking buyers, CoreLogic's head of research Tim Lawless said.
The market could remain lacklustre in advance of the May elections, given the main opposition Labor party's planned changes to tax breaks for property
investors, he said.
The top end of the market was being hardest hit, as banks were becoming more cautious in lending to borrowers with high debt levels and a surge in first-home buyers funnelled demand more affordable end of the market.
Australian research unit Capital Economics said it expected to see prices fall at least another six per cent nationwide and at least seven per cent more in both Sydney and Melbourne.
"We think that prices in the eight capital cities will eventually fall by 15 per cent," wrote Capital Economics' Ben Udy. "As such the housing downturn will remain a drag on the economy throughout 2019 and into 2020."
Local economists have argued that the New Zealand market should be buffered from the worst of the downturn by the strong immigration and an ongoing shortfall.
Last year, ASB's economics team looked at the historic correlation between the Australian and New Zealand markets.
While they concluded there is a link they noted the correlation was strongest between Sydney and Auckland.
But Auckland and New Zealand hadn't seen the same level of new dwelling construction as the Australian cities - particularly in the apartment space.
The tighter supply here combined with relatively higher levels of immigration could offset the overall link this time, they said.
The latest Real Estate Institute of New Zealand figures (REINZ) showed Auckland's median prices off by 2.4 per cent in the year to the end of January.
Excluding Auckland, the rest of New Zealand was still up by more than 10 per cent for the year.
Regardless of any direct flow on the slow down is likely to be dampening Australia's broader economic confidence which does create an economic headwind for New Zealand.
Australia remains our largest two-way trading partner.