Why Sydney home values dropped 1.4% today

Was it more sellers than buyers that caused the mystery fall?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 13, 2015 5:21 pm AEDT

The value of houses in Sydney fell 1.4% today, according to the CoreLogic RP Data Daily Home Value Index.

Yes, Sydneysiders, your house is worth 1.4% less than it was yesterday. I'm not sure what time though, maybe it was after breakfast, and one of the kids had spilt milk on the floorboards.

Luckily, the value of your home is 12.08% higher than the same time last year. But that's not counting any renovations or work you've done on the house since last year though.

And for those property owners thanking their lucky stars they don't own a house in Sydney, don't get too carried away. Perth property values dropped 1.7% today, and have now gained just 1.8% since the same time last year. Melbourne home values were down 0.3% today, while Brisbane and Adelaide values fell 0.5% and 0.3% respectively.

So homeowners, do you feel like your house is worth a little bit less than it was yesterday? Do you feel the need to rush out and sell?

If you think I'm making fun of a daily housing price index, you'd be right. But it does shed some light on the stock market and daily share price movements.

Telstra Corporation Ltd (ASX: TLS) shares added 1.2% today, rising to $6.11. Given Telstra is worth around $75 billion (and a lot more than your house), do you really think the true value of Telstra changed by 1.2%?

Likewise Woodside Petroleum Limited (ASX: WPL) shares fell 1.7% – the same amount as Perth house prices. Maybe it's because Woodside is headquartered in Perth?

Another example is the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) fall of 0.4% today. Given the index tracks 200 of Australia's largest companies, do you think the true value of all those companies actually changed by 0.4% today?

In other words, price movements – as depicted by the index, the stockmarket or the CoreLogic RP Data house value index – has little relation to the true value of the underlying assets – and daily fluctuations, such as those mentioned above – don't really mean anything in the long term.

Approach the value of your shares in much the same way you would your house and ignore the daily movements – you'll be much better off.

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