Australian Property Prices Surge Amidst Economic Tumult: What’s Next?

Australia’s housing market is defying all odds. Despite economic setbacks and upheavals, Australian property values are skyrocketing with certain regions even setting new records.

In a recent piece by Hanan Dervisevic, it was highlighted that the national median property value is tipped to hit a new peak by the end of this year1. Quoting Tim Lawless, CoreLogic’s research director, “Dwelling values have already reached new record highs in Perth and Adelaide.” Brisbane isn’t far behind with expectations of a new record high by next month.

Property prices in Sydney also saw a notable rise, with an increase of 10.6% since January 2023, nudging close to the peak it hit last year1. Despite this, not every city is booming. Hobart, for instance, has seen a decline in its annual dwelling values by 7%.

But why is this upward trend persistent amidst global economic challenges?

One perspective comes from Greg Jericho who expressed surprise at the continued growth of the housing market even after the world suffered through a pandemic and consequent economic shutdowns. To put things into perspective, average residential prices across New South Wales now surpass their December 2019 figures by $284,0002. Tasmania isn’t far behind, with properties costing, on average, 49% more than pre-pandemic rates2.

Economists believe a few factors contribute to this trend. Dr. Diaswati Mardiasmo, PRD’s chief economist, commented on the situation, saying, “Dwelling supply, especially for houses, has dwindled significantly. The number of loans issued for the construction or purchase of new homes are at their lowest since the GFC in 2008.” This short supply, coupled with increasing demand, particularly from international investors who have recognized the resilience of Australian property prices, is driving prices skywards.

Jericho also addresses the importance of understanding housing affordability. He suggests that Australian housing’s continued price rise stems from various policies and the inherent political belief that maintaining rising house prices is crucial. His colleague, Richard Denniss, aptly summarizes this sentiment by stating that seemingly everyone but the Australian government recognizes the housing market as a promising investment.

With interest rates near their zenith and a strong rebound in population growth, there’s a shared expectation among experts that property prices will continue to climb. Still, as Dr. Mardiasmo pointed out, the skyrocketing increase witnessed during the pandemic might not repeat itself.

Both articles bring forth a crucial discussion about the need for long-term solutions, with Jericho advocating for public housing to improve supply for low-income earners and serve as a potential profitable venture for the government.

For those considering diving into the Australian property market or those already invested, it’s essential to stay informed and seek expert advice. After all, as Jericho rightly mentioned, “Past performance is no guarantee of future success.”

References:

“Property values are tipped to reach a new high. Here’s how much prices have risen in each capital city” by Hanan Dervisevic. https://www.abc.net.au/news/2023-10-04/house-prices-state-by-state-breakdown/102927968

“House prices just keep rising – everyone but the Australian government can see it’s a good investment” by Greg Jericho. https://www.theguardian.com/business/grogonomics/2023/sep/12/house-prices-just-keep-rising-everyone-but-the-australian-government-can-see-its-a-good-investment