Economic forces are famously difficult to predict, and it is quite possible these aspirations will prove true. It’s just as likely, however, that housing prices will continue to deflate a further 10 to 12 per cent in real, inflation adjusted terms over the next three years before they become stable once more. Enzo Raimondo, CEO of the Real Estate Institute of Victoria recently stated: “We anticipate a reduction in the median price from $601,500 in December last year [2010] to somewhere between three to five per cent below that in March [2011].” He was being right for Melbourne and Brisbane at least, where housing prices fell from the December 2010 quarter to the March 2011 quarter by 2.5 per cent — in inflation-adjusted terms, well over three per cent. It seems just as likely that the remaining two per cent drop will occur during the April-June quarter.

The figures for the value and number of dwelling commitments also show a distinct downward trend. The graphs indicate a simple slump downwards for both of these since October 2010. At times the actual demand is either quite below or somewhat above the trend figures, but the overall pattern is evident.

While at first blush it would seem that people buying new homes and needing new furniture would be the best economic driver for our industry, I’m not at all sure that will prove to be the case. If houses become homes once more, a place to live in and be cherished, rather than the material aspect of a financial transaction, it’s quite likely that people with average incomes will be a little more inclined to spend further on their furnishings. They’ll spend more, and they will seek pieces of greater value and quality. That’s a market that the Australian furniture industry is well-positioned to supply.

So we needn’t be too glum, I think. It’s a little painful when things return to a place closer to their true value, but in the long run it provides a much better foundation on which to build an earned, rather than chance, prosperity.