Over the past week, the Australian media has been full of articles about the sharp decline in home values, with one commentator noting that Labor’s budget has triggered a housing slump that has wiped $230 billion from property values. In reality, the decline in home values is minor in a historical sense. However, with Australian mortgage rates among the highest in the world and rate cuts off the RBA’s agenda for now, prices must fall. In his latest research note, Shane Oliver estimates that Australian real home values are around 20% overvalued relative to their long-run trend:AdvertisementThe overvaluation is worse for houses than for units, and it is most pronounced in Brisbane and Adelaide, following six years of explosive price growth. I am less optimistic than Oliver and anticipate a double-digit decline in home values nationally.