House prices grew at third fastest rate in history: REA

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on November 24, 2021 Fact Checked
House prices grew at third fastest rate in history: REA

New analysis reveals capital city house prices have grown at the third fastest rate since 1880.

REA Group's PropTrack analysis reported that Australia's capital city house price grew 22% over the past year when adjusted for inflation. 

This rate of growth has only been matched two times in history - in the 1950s (when prices grew 111% following the end of wartime price controls) and 1980s (29% growth amid financial deregulation). 

Paul Ryan, PropTrack Economist, said that house price growth is a 'modern phenomenon', citing that house prices shot up following the initial uncertainty of the COVID-19 pandemic.

"Exceptionally low borrowing costs, as well as the ability for more people to work from home, have driven price increases across the country, putting particular pressure on regional areas," Mr Ryan said.

"While the previous historical episodes of very strong price growth have both been followed by price falls, it is hard to see the same downturns befalling the current market, at least in the near-term."

In the 1950s, 'wartime powers' brought rents and house prices under control of the government, but after the second world war, this control was repealed.

Without it, prices doubled which led to the biggest house price increase in Australia's history.

Additionally, in the 1980s, the removal of limits on interest rates for loans, 'floating' of the Australian dollar, and new competition from foreign banks 'significantly modernised' the sector.

This created improved access to credit and helped facilitate the housing boom of 1989.

However, rapid price growth culminated in a financial crisis, which weighed on house prices in the following years, according to REA Group.

"The outlook for price growth in the coming period appears solid, if unlikely to be as exceptional as we’ve seen over the past year," Mr Ryan said.

"While the large number of property listings, particularly in Sydney and Melbourne as they come out of the most recent lockdowns, may put some downward pressure on prices, there remains a very high number of buyers in the market on realestate.com.au waiting to find their new home.

"APRA has implemented some tightening of credit conditions, but overall borrowing conditions remain very favourable, and the RBA reaffirmed its expectations that interest rates would not rise for another two years, at least."

'Strong' spring selling conditions expected to continue into summer

Sellers remain 'optimistic' the market results over spring will continue into the summer selling season according to Domain's latest property report.

The report provided specific areas across five capital cities - Sydney, Melbourne, Brisbane, Adelaide, and Perth - that had the highest weekly lift in new listings over the past week.

  • Sydney: Hawkesbury; Richmond - Windsor; Botany; Dural - Wisemans Ferry; Pittwater
  • Melbourne: Darebin - South; Manningham - East; Monash; Stonnington - East; Essendon
  • Brisbane: Redcliffe; Narangba - Burpengary; Capalaba
  • Adelaide: Prospect - Walkerville; Port Adelaide - East; Adelaide City; Marion; Mitcham
  • Perth: Swan; Cottesloe - Claremont; Bayswater - Bassendean; Mandurah; Kalamunda

Domain's findings revealed an ongoing rise in the number of new residential listings across Sydney (up 3%); Melbourne (up 3%); and Brisbane (up 2%).

This should give more choice to buyers as there is less competition in the market, according to Domain.

Perth listings are down by 8% and Adelaide is down by 3% when compared to last week, however, these cities are coming off 'record' levels from the week prior.


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Rates correct as of December 7, 2021. View disclaimer.


Image byMarc Olivier Jodoin on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Rachel is a Finance Journalist, and joined Savings in 2021. Coming from a background in the FinTech space, her interests include the innovation of lending technology, property, investing, and more. With a passion for educating and informing people about their finances, she hopes to increase the financial literacy of everyday Australians.

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