Time machineOver the past 20 years, house prices in Brisbane have outperformed those in Sydney or Melbourne. Average annual capital growth has been 7.8 per cent in Brisbane, 6.34 per in Sydney and 6.8 per cent in Melbourne (Residex). Change the time scale to the past seven years and Perth dwellings performed best, with prices growing 13.5 per cent a year, followed by Brisbane on 10.1 per cent and Adelaide with 9.7 per cent (RP Data).
Home helpAverage house prices in capital cities showed an increase in the 12 months to September 2009, despite a negative first quarter. But analysts’ figures varied:ABS 6.2%Residex 4.6%RP Data 6.0%APM 6.5%
Best performers Melbourne, Darwin
Worst performers Brisbane, Perth
Reports of the death of the Australian property market were greatly exaggerated, writes Harvey Grennan. On the contrary, house prices and sales are bouncing back.
The world didn’t collapse in 2009 after all. Despite predictions of a calamitous crash in Australian property values, as happened in the US and the UK, property is back.
In reality, it never went away. It has been limping along for about six years, culminating in the global financial crisis, but in Australia, while prices dived in many coastal and regional areas, property held up reasonably well in the capital cities. With the exception of Sydney, houses and units in all capital cities have averaged capital growth of 10 per cent a year or more over the past 10 years. Admittedly, much of that growth was prior to 2004 – the bottom of the market was actually the end of 2008.
Now there are signs that prices have taken off again, and country and coastal regions should catch up. According to the Australian Bureau of Statistics, the September 2009 quarter saw a rise in capital city house prices of 4.2 per cent, the strongest result in six years, on the back of a solid June quarter.
The global financial crisis, rising interest rates, a reduced First Home Owner Grant and the threat of another biblical flood notwithstanding, the fundamentals have always supported a recovery in property prices. In Australia there is a chronic shortage of housing, record immigration, and not enough dwellings being built to meet increasing demand.
What had been missing, but has now returned, is confidence. In the September quarter, house prices in Sydney surged 2.9 to 5.7 per cent, depending on which analyst you believe, and in Melbourne by 4.7 to 6.5 per cent. There was positive growth in Canberra and Adelaide, although experts disagreed on the state of play in Darwin, Brisbane and Perth.
An interesting trend is that units performed better than houses in 2009, due to the increased First Home Owners Grant (now reduced) and a shortage of new unit developments.
Analysts are predicting steady but slower growth. Property market analysts RP Data believes the heat started coming out of the market in September last year and predicts more normal growth rates with rising interest rates dampening buyers’ exuberance. While Residex expects positive growth they say it will be “small to minimal” for the same reason. Australian Property Monitors expects “moderate to strong” growth but says rising mortgage rates could put the brakes on this trend.Illustration by Antonia Pesenti