The Treasurer said while prices had fallen they were coming off from a substantial surge over recent years.
“I think there was concern from property analysts economists, central bankers and the general public about particularly high housing prices but what we have seen is a moderation in those prices off those highs now,” he said.
Kooyong is the starting point for an eastern suburb belt of house price pain where Prime Minister Scott Morrison needs to hold key seats if he is to defeat Labor leader Bill Shorten.
In adjoining Chisholm, the seat won by Liberal-turned-independent Julia Banks in 2016, house values have dropped by almost 13 per cent.
Aston and Deakin, which the Coalition fear could be claimed by Labor in May, have suffered electorate-wide falls of 11.3 per cent and 10.9 per cent respectively.
The worst performed Labor-held seat in Melbourne is Scullin where values have fallen by 9.4 per cent. Northern suburbs including Mill Park (11.5 per cent) and the northern part of Bundoora (13.6 per cent) have taken the biggest knocks.
John Scales from JWS Research said the falls in house prices could play differently in the various seats.
He said in Liberal-held seats such as Kooyong and Deakin, there may be a focus on the impact of Labor’s negative gearing policy and how this could affect future changes in house prices.
“People might think I’m not going to make as much money, I might have to change my investment plans and go into something else,” he said.
But in Labor-held seats, falling prices may feed into an attitude that housing is becoming more affordable.
Labor’s policy around a “living wage” could also tap the concern of some voters that the run-up in prices had got out of hand.
Peter Lewis from Essential Media said housing affordability was being mentioned in his organisation’s polling, with many swinging voters still concerned about their ability to either rent or buy a home rather than concerned about falling prices.
He said it was unclear whether a correction in the housing market, after a huge run-up in prices, would lead to widespread angst as it only affected those trying to sell at the moment.
The Coalition’s targeting of Labor’s negative gearing policy may resonate, but if those voters were already older and wealthier this cohort were already more likely to be supporting the government.
“It’s an issue of swings and roundabouts – if the Liberal attack is negative gearing it will solidify the haves but it further gives the have nots yet a reason to look somewhere else,” he said.
AMP Capital chief economist Shane Oliver said this decade’s price boom was an extension of a surge in property that began in the 1990s.
At the time, real house prices across most of Australia were below their long term averages while household debt levels were low compared to other OECD nations.
“Now we’ve got household debt at the top of the OECD average and house prices are well above their long term average, we’re talking 8 or 9 times household income in some parts of Sydney and Melbourne,” he said.
“That’s why I think this correction may take a bit longer to work through than we’ve had in the past.”
Reserve Bank governor Philip Lowe has said that the housing market will not “derail” the Australian economy.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.