There appears to be at least a tiny bit of heat coming out of the house price market as a mix of tighter regulations, stretched affordability, common sense, lower underlying demand and a surge in new supply all start to bite. Weak wages growth and low income growth is also acting to dampen demand for housing with about the only thing in favour of stronger house prices being low interest rates.
Everyone knows the fickleness of the daily house price series from Corelogic, but I like there data. Knocking it is a bit like heaping criticism on the stock market where share prices change every day, often by quite a lot, for no obvious reason. But data are data and nonetheless there is important information in price moves in most time series be they annual, quarterly, monthly, weekly or daily.
Given the importance of house prices to economic policy and even the political debate – Prime Minister Abbott is hoping that “house prices keep increasing” – it is enlightening to see how the Corelogic data is showing that prices in some areas have fallen in recent times.
A big caveat.
It would be wrong to use this information as a sure sign of an imminent free-fall in houses prices and a bursting of the proverbial bubble, but the trends outlined below are sort of interesting. And as someone once said, a march of 1,000 miles begins with a single step.
Here are the data on house prices falls from the recent peaks.
Peak Fall since peak
Sydney May 2015 -1.3%
Melbourne Apr 2015 -3.3%
Bribane* Feb 2015 -1.0%
Adelaide Apr 2015 -0.1%
Perth Dec 2014 -2.4%
Five cities Apr 2015 -1.4%
* including Gold Coast.
Of course, many of these falls come after huge increases, so the moves are generally small beer. There could be some seasonaility or just a pause, as there is in every price boom. If this is the case, new price highs will be reached in the months ahead. And interestingly Adelaide prices are only just off their peak, but prices there were never really super-strong to begin with.
Every now and then I will update these house price falls and it should be very interesting to see if or when or by how much the house price bubble bursts.