Depending on your perspective, yesterday’s established house price statistics released by the ABS were either very good news or very bad news. Overall, established house prices grew by 2.2% in the September Quarter and 9.5% annually, far and away above the 0.9% quarterly growth expected by many economists.
Further analysis of the figures highlights the extent to which Australia’s two-speed economy is impacting upon house prices. Established house prices in Perth soared by 45.9% in the year to September, while prices in Darwin surged by 17.3%. At the other end of the spectrum, Sydney’s established house prices grew by just 0.2% in the September Quarter and 1.4% annually.
All other capital cities registered relatively strong growth for the year: Canberra – 10.5%, Hobart – 9.4%, Melbourne – 7.5%, Brisbane – 6.5% and Adelaide 6.4%.
While these figures may be reason for home owners to crack the bubbly, prospective house buyers are more likely to reach for the gin while counting the years of rental payments they are likely to make before they are ever able to purchase their own property.
In-depth analysis of Sydney house prices, carried out recently by the Macquarie Bank, further emphasises the growing disparity between the haves and have-nots in the housing market.
This Macquarie chart shows a summary of the rise in median house prices in a number of Sydney suburbs between the 1996 and 2006. The most striking aspect of the graph is that median prices of homes in big-name suburbs close to the CBD and the coast have grown by about five times the median prices of suburbs in the far west of Sydney.
Whilst this stands to reason, it contradicts the argument put forth earlier in the year by the IPA that the prime reason behind housing un-affordability is arbitrary zoning laws set by State Governments. The argument was that the State Governments were pushing up house prices by refusing to release land on our urban fringes, and therefore pricing home buyers out of the market.
The Macquarie Bank data finds that the old real estate maxim – location, location, location – is all important. The demand for housing over the past decade has been centred on suburbs close to the CBD or the coast. Therefore, releasing more land on the fringes will not help the price rises occurring closer to the action.
Clearly the reason behind housing un-affordability is not as simple as “inadequate land release”, although it may play a part – rather it is more likely a complex combination of rising high level incomes, low interest rates and the ongoing economic boom.
Read more at Henry Thornton.