I think the impact of the tightening of lending criteria is only just beginning CG. If you have a read of some of the stuff about the household expenditure measure (HEM) then it gets really interesting. The Westpac loan sample from the Royal Commission was enlightening.
A lot of the tightening in the last year has been targeted specifically at investor lending and interest only loans. While investor lending has been down the state governments in Victoria/NSW have enticed more first home buyers with grants. But a broader focus on actual spending by applicants (not a measure basically at the poverty line) will see credit availability for owner-occupiers also reduce.
So lets say we get to that 10% down area in Syd/Melb (could be the end of 2018 at this rate) then I think you start to see the herd effects coming in and media coverage. Then I think the remaining buyers turn from FOMO to wait and see. Then you have the interest-only cohort (speculators) needing to refinance. Even if investor lending is loosened again I think many speculators will reassess holding if prices have fallen 10%.
Not sure what the government can do then to stimulate again. Very possible that the market takes on a mind of its own then.
(20min delay)