Researchers at CoreLogic are reassuring the country that all is not as bad as it seems.
This follows a recent episode of 60 Minutes which forecasted the chance of a 40 to 45% reduction in house prices.
But Tim Lawless, research director at CoreLogic, said this was not a likely outcome at the moment.
He pointed out that housing risks have heightened over the last year, with slipping dwelling values, higher mortgage rates, plus high levels of household debt, but that looking at the current downturn in housing, it is “unremarkable”.
In Sydney, house prices fell by 5.6% since July last year, which is not as much as during the financial crisis when they fell 7% in the space of a year.
Melbourne has also seen a fall in property values, with a drop of 3.5% since November, which Lawless said is less of a decline than previous downturns.
Darwin has seen prices fall for the last four years, but even here it has only dropped by 21.8%, which is not close to the 40 – 45% being predicted.
In fact, Moody’s Analytics has forecast only a slight downturn with growth returning by the middle of 2019.
Moody’s’ assessment of dwelling values is based on rising business investment, particularly in the non-mining sector, a rise in infrastructure spending, above trend jobs growth, and ongoing low interest rates.
He said, “In balance, even with mortgage rates edging higher, we are still in the lowest mortgage rate environment since the 1960’s.
“Population growth remains strong and maintaining a consistent migration policy seems to have support from both sides of politics which will continue to support demand for housing.
“Labour markets are reasonably healthy with unemployment holding at 5.3% and likely to trend lower, underemployment at the lowest rate since May 2014 and jobs growth above the long term trend.
“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.”
