New Modelling Methods Forecasts Property Price Drop

A study using new modelling methods for analysing general property market trends predicts light may be on the horizon for Australian home buyers.

The study compiled by researchers from Curtin University, Swinburne University & The University of Western Sydney forecast falls in Melbourne, Perth and Brisbane real estate markets, while Sydney meanwhile, ought to level-off after a moderate, continued climb for the time being.

The study is currently under review for the Economic Record, but if its predictions pan out to be spot on, then we can expect a: 

Biggest Benefit

Dr Valadkhani believes if the modelling proves accurate, it will aid families most. "If we are right about the coming price adjustment, even if it is not a bubble, it will be very costly for many families that have borrowed and put their lifetime savings into one particular house. If they can get an idea of what is likely to happen, even just a few months ahead, they can avoid mistakes”.

Not Just Any Study

What makes this study different to most is that it has been in the works for 2 decades!

It uses an analysis of monthly home price data collected over the last 2 decades by a team of researchers from various universities. Ronald Ratti from the University of Western Sydney, Abbas Valadkhani of Swinburne University  and Greg Costello of Curtin University.

The home price data was used as the basis for the forecasts.

The modelling is the first which can be updated month by month according to the developers, allowing them to keep track of trends to forecast future inflexion points on a continuous basis.

The outcome of the Economic Record review should be illuminating and will give an indication as to how reliable the modelling actually is. 

Any Drawbacks?

Unfortunately, this modelling is unable to figure out the timing and size of more-detailed pricing changes, however, it is still incredibly useful for projecting the overall outlook of real estate price shifts throughout Australia.

"This doesn't predict every seesaw movement. It only predicts the general direction of prices. If it could predict exact movements we would be multimillionaires and wouldn't need to work in academia. The actual prices could be a little bit above or a little bit below the trend we are predicting”, points out Dr Valadkhani.

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