House prices are made up of two things - cost of land, cost of house.
I see many outer suburbs that have grossly inflated land prices. Seriously - 350k for a block of land that's a 45 min trip to the CBD in any number of new 'estates', or 450k for one 10mins from the CBD that's as rare as hen's teeth! I know which one is at fair value!
Those outer blocks will drop back down substantially - there is no benefit to that location and no uniqueness - plenty of competition! Closer to the city I don't think prices will drop much - (a) because there is only so much land there and (b) people will seek out quality in this sort of market; so demand will still be there.
Cost of houses - well cost of new houses has been sky high for ages due to demand - tradies charging what they want, making a motzah. I've never seen so many flash new utes at construction sites! We'll see that price drop, for sure (already has, if I read the ads right on the weekends). And I have always been amazed when people are happy to pay $100k+ over the land valuaton for a complete dump! Seriously - get a land valuation, estimate the value of that rundown post-war 3 bedder that's on it ... and that's the correct price! Even a new 4bedroom brick veneer is only $150k or so to build these days - why are people paying that much for the rundown old post-war termite infested dump that is on the block!
So IMHO there will be a greater focus on the value of the land - ergo the value of the location. And for new houses, couple that with a drop in the cost of building ... and I think you will see some house prices drop pending on location only!
We will see the outer suburbs return to being the place for the battlers, and the first home buyers seeking to get a foot in the door ... how it has always been up until recently (i.e. until the McMansioners decided that a lake and a park was a good enough to reason to move so far away from the city and drove up prices by creating such an artificial demand).
So perhaps 40% is feasible - but only in certain pockets.
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