Home values are falling, but it's "unremarkable" says CoreLogic

If you’re afraid of the falling Australian home prices, there’s some comforting analysis suggesting that this is more normal than some would lead you to believe.

Buying a home now carries the risk that it may not hold its value for much longer, a story that is getting repeated time and time again by many in the media, but analysis is suggesting the doom and gloom being talked about may not be all that bad.

CoreLogic’s Tim Lawless points out that while “dwelling values are slipping lower”, the numbers haven’t been anywhere near as significant as the likes of Martin North on 60 Minutes has suggested, touting numbers as high as a decline of 40 to 45% in dwelling values.

“Australia’s largest housing market, Sydney, has seen values fall by 5.6% since peaking in July last year; a trajectory that is straight down the middle of previous downturns. During the GFC, Sydney dwelling values fell by 7.0% in the space of twelve months, and the downturn before that (2003-2006) saw values fall 7.1% over the same number of months,” wrote Lawless.

“Australia’s second largest city, Melbourne, has seen values falling since November last year. Since that time the market is down a cumulative 3.5% and the descent has generally been milder relative to previous downturns.

“Even in markets where values have been falling consistently for more than four years on the back of a material weakening in economic and demographic conditions, we haven’t seen values fall by anywhere near 40%. Perth dwelling values peaked in 2014 and have fallen by 12.6% and in Darwin where conditions have been even tougher, dwelling values are down 21.8%.”

Since the 60 Minutes segment aired, the two experts featured — Martin North and Louis Christopher — have clarified their comments, citing these as a scenario that wouldn’t necessarily come true, and that’s something Lawless agrees with.

“If we look at the current downturn in Australian housing, the trajectory of decline is actually quite unremarkable,” he said.

“Overall, it’s hard to see a scenario where Australian housing values could fall off a cliff. For this to happen we would need to see a material about face in labour market conditions, a global shock or a material rise in interest rates – none of which seems to be a likely outcome at the moment.”

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