House prices grow at third fastest rate in Australia’s history

PropTrack analysis of house price growth in Australia from 1880 to now has found that house prices are growing at the third fastest rate in Australia’s history on the back of strong property market conditions.

PropTrack Economist, Paul Ryan said house price growth was a modern phenomenon, with the current rate of growth matched only twice in the country’s history; in the 1950s and the 1980s.

“House prices have shot up recently following initial uncertainty at the onset of the COVID-19 pandemic,” he said.

“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.

“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.”

Mr Ryan said the outlook for price growth appeared solid, but was unlikely to be as exceptional as in the past year.

“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 waiting to find their new home,” he said.

“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.”

Price growth in the 1950s and 1980s

In the 1950s, wartime powers that brought rents and house prices under the control of the government during and after the Second World War were repealed.

With no more controls, prices doubled and saw the biggest increase the country has ever seen.

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

This led to improved access to credit and helped facilitate the housing price boom in 1989.

Rapid price growth culminated in a financial crisis, which weighted on house prices in the following years.

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