FFFRecent headlines have flagged a fall in Australian capital city house prices. But does it mean anything for you?

CoreLogic’s November Hedonic Home Value Index showed that in November there was a -0.1 per cent fall in capital city dwelling values. This was, however, offset by a 0.2 per cent rise in regional values.

The bank can’t force you to sell because the property value has fallen, as long as you make your repayments.

During the quarter ending in November, house values went backwards in Sydney (-1.3 per cent) and Darwin (-2.7 per cent). Sydney is crucial in national housing data: it holds one-third of the country’s housing value. But if you look at the big picture, there is no need to panic.

Firstly, capital cities are coming off very strong growth trends – the types of price rises we’ve seen so far are hard to sustain long term. It’s no surprise the market needs to take a breather.

But if property values do fall, what effect does it really have on you?

A few tips:

Don’t panic: property value is influenced by market sentiment, interest rates and economic data. You can do nothing about these factors, but you can control your investment timeline: view property in 10-year windows, and try to buy well. Take the panic out of it.

Two-way traffic: Australian house prices don’t always rise: they fell in the early 1950s, the early 1990s, in 2008 and 2010. Realise that the market will always have ups and downs – it’s the nature of it.

Realised losses: value indices are theoretical until you sell and realise a loss or gain. As long as you meet repayments, the bank doesn’t call in a loan just because the value drops. You can still live there and wait until prices rise.

Renovations and investments: this is where a slump can become real. If you want to access equity to fund a renovation or buy an investment property, a lower house value could crimp your borrowing power.

Short term: given the time and costs of buying and selling property, a short-term “flipping” strategy could be uneconomic if values trend down. Fix this by thinking long term.

Giant pool: don’t be fooled by terms such as “Sydney property” or “Australian housing”. They’re vast markets and an “average” or even a “median” may not mean much to you. Lenders are very specific, using a valuer’s assessment right down to the street and house.

Budget: only when you’re forced to sell do low property values become an issue. So, take control of your household budget, ensuring you can meet repayments and retain your house through a price slump. This is crucial when interest rates start to rise.

Protection: along with household finances, ensure you have adequate insurances to cover repayments in case you can’t work. Don’t be forced to sell when the market is down – that’s when you lose money.

Advice: if you’re worried about values, stay close to experts such as mortgage brokers and real estate agents. Don’t be panicked – be informed.

The family home is most people’s largest asset, and it’s normal to be concerned about its value. But always base your decisions on real information and expert advice.

M. Bouris, “How a property price slump would affect existing homeowners”, The Sydney Morning Herald, 2017. [Online]. Available: http://www.smh.com.au/money/investing/how-a-property-price-slump-would-affect-existing-homeowners-20171208-h01788.html. [Accessed: 12- Dec- 2017].