A leading economist has weighed in on whether Illawarra house prices will be spared the caning faced by the Sydney market in 2019.
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Alex Frino, Professor of Economics at the University of Wollongong said according to a new formula, the Illawarra is looking at a total house price fall of about 9.3 per cent in 2019.
Prof Frino said Moody's - "a very independent and also credible forecaster" - is forecasting that Sydney house prices for 2019 will fall by 9.3 per cent.
"(Although) that seems a little on the low side given the fall to Sydney is already around five per cent for the year," Prof Frino said.
Prof Frino said research recently completed at the University of Wollongong has worked out the "magic" formula that ties Greater Sydney house prices to Illawarra house prices.
"Using a sophisticated statistical technique known as econometrics, and using 36 years' of house price data for the Illawarra and greater Sydney supplied by CoreLogic, my team at the university has worked out the magic formula that ties our house prices to Sydney house prices," he said.
Prof Frino said the formula they had developed is as follows: Illawarra price change this year = 0.6 Sydney house price change this year + 0.4 Sydney house price change last year.
"Put simply, any year's house price change in the Illawarra is equal to 60 per cent of this year's price change and 40 per cent of last year's house price change," he told the Mercury.
"Wollongong takes about a year to absorb what happened in Sydney last year."
Prof Frino said their work suggested that this formula is about 65 per cent right in any year.
"We are at a unique point in time," he said. "Last year's Sydney house price change was -9.3 per cent, according to CoreLogic.
"If Moody's is right, then the 2019 house price change is going to be roughly the same at -9.2 per cent.
"You don't have to be Einstein to work out that, given our magic formula, it seems that the Illawarra is looking at a house price fall roughly equal to Sydney's this year.
"It's going to be around -9.3 per cent."
Prof Frino said CoreLogic's latest house price data for the Illawarra indicated that house prices in the Illawarra fell yet again for the month of April.
"They fell by one per cent," Prof Frino said.
"One per cent doesn't sound like much, but if prices fall one per cent per month, in 12 months you will lose 12 per cent of the value of your property. And in two years you lose almost 25 per cent.
"It is a lot. This also represents the 12th month in a row that Illawarra house prices have fallen.
"In fact for the year to April 30, house prices in the Illawarra have fallen by roughly 12 per cent."
However, Prof Frino said before home owners cry poor - don't feel so bad.
"This is because that CoreLogic data shows that in the five years before prices started falling in the Illawarra, if you owned a property, you would have been ahead a staggering 56.7 per cent," he said.
"Therefore you would still be ahead by 40 per cent if you bought six years ago."