Monday, August 20, 2007

Australian House Prices

I put together this chart of house prices for the six Australian State Capitals and Canberra from the official government data:

There is also data available for Darwin but it was too erratic and Darwin is so small that I dropped it. And I also computed the year over year rates of change:

Next, I'll try to come up with the real changes in house prices adjusted for inflation in the prices of other goods and services. That will give a better idea of what we might expect in the future. General inflation was much higher in the late 1980s than recently and so the average rate of house price appreciation over this period is misleading I think.

After the initial subsidence in prices around 1990 there was an "echo boom" that was more noticeable in some cities, particularly the smaller ones. And, again, recently the rate of price increases subsided or prices fell absolutely (in Sydney in particular) but now we are in a new period of house price inflation, especially outside of Sydney. The echo boom in Perth is much greater than the initial boom there. This is entirely related to the boom in the mining industry.

I've noticed that there is a four year cycle in the US housing market, just as there is in the US stock market. It seems this same four year cycle could be present in Australia, superimposed on the longer 16 year cycle. By this interpretation, we are now near the peak of a four year cycle and should see a reduction in the rate of increase in prices over the next couple of years. 2009-10 could be a good time to buy a house.

3 comments: said...

Tradionally the view (at least for Sydney) is that real prices for housing increases about 2-3% real pa. This is slightly misleading as it doesn't allow for home improvements.

The housing cycle is usually around 5-7 years for Sydney. The biggest booms were in 87-87 and 99-02.

mOOm said...

The number for Sydney in that data is 3.0%. But I think that is a bit misleading maybe as I'll discuss tomorrow. Peak real prices occurred in Sydney in March 1989 and December 2003. Almost 15 years peak to peak. The 4 year cycle is superimposed on that longer one.

Anonymous said...

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