What is actually happening to Australian house prices (chart)??

Oh boy do we see a lot of complete crap sprouted about Australian house prices from folks who really do not know what they are talking about. With that off my chest, I am preparing for a speech I am giving tomorrow to the CEO's Forum and working my way through the RP Data-Rismark hedonic index data. Here is a chart comparing the capital city and rest of state (ie, all regions but the capital cities) dwelling price indices since the end of 2006 (click to enlarge). That is, it covers all of Australia. Observe how the market has been flat-lining in both sectors since about May last year, as we correctly forecast (we projected 4-5% growth in 2010 at the beginning of the year and got about 4.7% from memory).

As blind-freddy can see, most of the downward shift that occurred recently was a January--and presumably flood-related--effect. For the time being, dwelling prices don't look like they are going anywhere quick. They are certainly not "falling fast". Soft, they are, to be sure. Again, we have forecast this outcome since the middle of last year. And, as we have argued for 12 months now, the risk is to the downside if the RBA hawks up with interest rates 2-3 times this year.

Anyone who claims that this position is "bullish" on housing in the near-term is an intellectual invalid. At the same time, anyone who claims that a 1% year-on-year retracement in dwelling values is a major asset-class event (cf. the share market frequently falling more than 5% on a given day) needs their head examined, with the greatest of respect. And I sincerely meant that latter caveat: you genuinely should seek medical advice if you are convinced that house prices are plummeting.