The last time the median real estate sales price in the Illawarra actually fell was in September 2020.
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That was only 18 months ago, but since then the median Illawarra real estate price has risen a dizzying 44 per cent, according to the latest numbers from property data specialists Corelogic.
That's right, since mid-2020 when we were in the worst of the COVID-19 pandemic, Illawarra house prices have increased by an average of around 2.5 per cent per month.
These rises have completely outpaced the rise in median real estate prices in Sydney, NSW and Australia, which only put on between 30-35 per cent over the same period.
Take a slightly longer view, and it has taken only seven years for the median Illawarra real estate price to double.
If you bought a piece of real estate in the Illawarra in March 2015, today that property would be worth twice as much.
If you bought a piece of real estate in the Illawarra in March 2015, today that property would be worth twice as much.
As with anything that's so positive, the naysayers come out in force and predict a doomsday.
Whispers from the Commonwealth Bank are that house prices will fall by some 12 per cent over the next 18 months or so.
ANZ and Westpac have also predicted significant house price falls.
Now let me let you into a little economists' secret.
We often get it wrong.
Negative predictions rubbish
A lot of these negative predictions are based on forecast rises in the cash rate by the Reserve Bank of Australia, that will supposedly activate some invisible tripwire causing house prices to plummet.
In my humble opinion, this is rubbish.
Interest rates are set globally, not by the Reserve Bank, and Australian interest rates just respond to the global money market.
Take for example the 10-year Australian government bond rate - which better reflects the cost to banks of raising funds that they on-sell to you in the form of home loans.
The 10-year Australian government bond rates were about one per cent in February 2020 and they have since doubled to be currently around two per cent.
Over that same period house prices rose by almost 50 per cent. Therefore, I don't think the Reserve Bank interest rates will have much of an impact.
Last time the Commonwealth Bank predicted a 10 per cent or more fall in house prices over the following 18 months was around September 2018.
What happened?
They did show some downside, but over that 18 months or so they finished around one per cent higher, not lower!
I am having some fun at the expense of Combank's economists. However, it is clear that the Illawarra real estate market is starting to cool - but not fall. Yet.
Since February last year, when the median Illawarra price increased by roughly six per cent in that month alone, the monthly increase has been gradually falling.
That means that Illawarra real estate prices have still been rising, but by a smaller amount each month.
That is, they have been cooling.
And this February just passed, the median Illawarra real estate price change was down to zero.
Property sales falling
Another clear indicator that the real estate market is cooling is the number of successful sales.
The number of real estate sales has fallen steadily since around the middle of last year.
According to Corelogic, over the last 12 months the sales have been around 6200 - about nine per cent lower than the middle of last year.
The last time we had an extended cooling of house prices and significant falls was from around the middle of 2017, caused by the regulators putting the brakes on lending for real estate investment purposes.
As soon as they took their foot of the brake, house prices shot back up.
In a sense, prices had to shoot up to make up lost ground over that "braking" period.
If we take the long view, over the last 20 years, taking upswings and downswings into account, the median real estate price increase in the Illawarra has been around 15 per cent per year.
So the increase in real estate prices over the last five years has been well below the long-term average.
Hardly a reason to call for a crash.
So house prices are cooling, but will they crash?
Barring a black swan that I can't think of (that's why economists call them black swans) or some sort or regulatory action of the kind we saw in 2017, I don't think so.
- Alex Frino is Professor of Economics and Senior Deputy Vice-Chancellor (Innovation, Enterprise and External Relations) at the University of Wollongong.