Values are declining at a more moderate rate than regional Victoria more broadly.
- Tim Lawless
South-west property prices have declined since June last year, but high demand has seen a lower drop than in other areas of the state.
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CoreLogic research director Tim Lawless said the median price of Warrnambool homes had decreased by 5.1 per cent to $587,503 on January 7 since the COVID-19 peak on June 30, 2022.
However, the decrease was lower than the decline across the state.
"Values are declining at a more moderate rate than regional Victoria more broadly, where dwelling values have slumped -6.0 per cent since peaking," Mr Lawless said.
Prices increased by 34 per cent over the two-year period, which was the biggest increase Brian O'Halloran and Co agent Brian Hancock has seen since the early '80s.
The median price of homes in the Colac-Corangamite local government areas reduced by 6.3 per cent to $508,873, while the median price in the Glenelg-Southern Grampians shires decreased by 3.4 per cent to $383,544 since June 2022.
However, it's not all bad news for home owners, with median values across the region almost 37 per cent higher than in March 2020.
Mr Hancock said he had been expecting the decline in prices for some time.
"In every market you have a high and a low," he said.
"Through natural attrition you have adjustments according to the market and interest rates, which I predicted about seven months ago."
Despite the decline, demand for south-west properties remains high, according to Mr Hancock.
"There's still buyers around - Warrnambool has a really solid buyer base," he said.
Mr Hancock said the spike in prices had been the biggest he had seen since the first home buyer grant was introduced.
"Back in February 1984, when the first home buyer grant was introduced, I was averaging 20 properties sold each month for several months," he said.
"We sold that many properties that we ran out of listings."
Mr Hancock said over the past two years demand had outstripped supply, which had again seen prices increase.
"Demand has been very strong, which forced the market up," he said.
Mr Lawless said house prices were expected to continue to decline due to rising interest rates.
However, the decline may ease once interest rates hit their peak, he said.
The declining house prices come on the back of a record drop across the nation.
CoreLogic data reveals national home values decreased by 8.4 per cent from May 7 last year to January 7.
That was a record decline in value - which was set when prices fell by 8.38 per cent between October 2017 and June 2019.
"While the housing downturn between 2017 and 2019 lasted 20 months, the new record-breaking price falls have played out in less than nine months, with further falls expected in the months ahead," a CoreLogic spokesman said.
"The main force behind record home value falls is the recent cycle of rate hikes that have risen at the fastest pace on record.
"A 300-basis point increase in the underlying cash rate over just eight months has resulted in a rapid reduction in borrowing capacity, lowering the amount buyers can offer for homes.
"In addition to constrained borrowing capacity, higher interest costs may be dissuading potential buyers altogether."
A post-lockdown surge in spending has also had an income on household savings, CoreLogic revealed in its home value index report.
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