The first time I compared the cost of houses between England and Australia was in February 2009 when I wrote….
Australia vs England at House Prices
On that occasion there were lots of news headlines going around suggesting Australia’s houses were among the most expensive in the world. I didn’t think so, having moved from England in November 2007 on an exchange rate of $2.26 AUD to the pound.
Then in August 2009 I wrote about it again in my post……
The Cost of Living in Australia: House Prices
That post turned out to be the most controversial and most read on this entire blog. Not everybody agreed with my price comparisons or my conclusion. That article was based on multiples of earnings rather than the current exchange rate, so AUD/GBP wasn’t mentioned.
By doing it that way it was a better guide to the affordability of housing in Australia for Australians, but not a good way of doing it for those intending of selling their English home to buy an Australian one. For the record, the exchange rate was about $1.76 AUD to the pound at that time.
Then in March this year I wrote ……
The Cost of Living in Australia: House Prices Revised
This post was based almost entirely on the cost of houses using the exchange rate at the time, which was about $1.65 AUD to the pound. Yet astonishingly the final conclusion in that one suggested that Australian houses could well still be cheaper than those in the UK.
I’m sure you can see that there’s more than one way of comparing house prices and also that this exercise is always going to be a moving target. That’s why I keep coming back to it.
So what’s new in this fourth look at house price comparisons?
Well, the pound continues to fall against the AUD; it went as low as $1.58 to the pound the other day. House prices in England look set to fall over the coming 12 months after a brief miniboom of late. So not much change there.
But this is different……
According to the Australian Bureau of Statistics, last year, that’s the 12 months leading up to June 2010, “Preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities increased 18.4% in the year to June quarter 2010.”
But since June, the Australian housing market hasn’t been so lively. When I first arrived here I’m sure the average time to sell a house was around seven weeks. Now some houses are sticking for months. Here’s what’s been said recently about Australian real estate….
- NAB (National Australia Bank) “the national average house price is forecast to rise by only 1.5 per cent in the next year.”
- RPData “capital city property prices fell 1.2 per cent for the three months to August.”
- The Sydney Morning Herald “Brisbane house prices slumped 2.3 per cent, seasonally adjusted, to $434,000, in the three months to August.”
- PerthNow says sellers are being forced to reduce prices. “House prices in Perth are on a downward trend with sellers reducing asking prices by 6 per cent as the local market floods with properties for sale, according to the Real Estate Institute of Western Australia.”
Yes, the housing market seems to have changed somewhat since June 2010. Many expect the year to June 2011 to be flat in terms of house price increases.
So I expect buying a house here in Australia to continue to offer better value than buying a house in the UK for some time to come. Even more so if the pound can start to fight back against the AUD.
But let’s move away from the Australian major cities for a while, and take a look at house prices around the rest of Queensland. These prices were provided by REIQ and I got them in a free pull-out provided by the Sunday mail here in Australia. They are all median prices as at June 2010.
Please remember that almost all houses here, and these are prices for houses, are detached. Cheaper than these are what we call units. Units are equivalent to semi-detached, terraced or flats.
- Ipswich city $323,000
- Moreton Bay $399,000
- Toowoomba $289,500
- Bundaberg $282,000
- Fraser Coast $307,400
- Rockhampton $315,250
- Townsville city $375,000
And my favourite, Banana. Yes we have a town called Banana and you can buy a house there for $265,000.
Just as an update on this topic , I happened to be reading an article by Christopher Joye who Jonny apparently does not regard as reputable , however it does include some graphs which compare Aus. to some other countries including U.K. so I thought it might provide at least some insight . http://www.businessspectator.com.au/bs.nsf/Article/housing-property-house-prices-UK-mortgage-tax-pd20110811-KM252?OpenDocument&src=sph
In my case , the property I bought May ’99 ( and still live in ) for $75k doubled in value in the first 2 years . It then doubled again in the next 2 years . It was appraised at $435,000 last year. It’s a basic house but on a small acreage 10 minutes from Hervey Bay CBD.
I didn’t just buy it just as an investment though , I wanted a place to live , had I invested the original purchase price for best gain and rented instead , I would be far worse off today .
With the benefit of hindsight , gold has been a far better investment choice compared to real estate over the last 2 years , fine for the wealthy , however one cannot live in a bar of gold .
A renter paying a modest $300 p.w. increasing 5% per year will pay about $500,000 in rent over 20 years . Food for thought.
As long as the population and wages are going up and development / infrastructure costs are going up , so will real estate follow , best locations will be the trend leaders , as has always been the case .
Bottom line , buying a property in Aus. is still a solid place to invest over the medium / long term , beats paying rent long term !
A very interesting article Gordon, especially the bit about “house price-to-income ratios”. I mentioned that in my revised article about house prices, when I divided the average annual incomes of each country into the average price of a detached house. It would take 13 years of UK income to buy, but only 7.7 years in Australia.
We have a rule in our house, never regard your home as an investment, it’s a place to live. If it goes up in value, fine, but makes no difference, because if you move you will have to buy another one. On that basis, makes no difference if it goes down either. And yes, I think buying is always better than renting.
Bob yet again proves he knows little about OZ as house prices here when up by over 200% in 5 years and Perth nearly 300% from 2004 to 2006 thanks to the mining boom.
A house I sold in Perth 2003 for $320k in a beach area is now selling at $1.3 million .
House prices Australia wide have never increased by more than 200% in a 5 year period. Came close 1971 to 1976.
I do apologise, but I do not have any specific data regarding the area of Perth to which you refer or the house you used to own that was close the beach.
Maybe you did Jonny, and perhaps certain areas have suffered at certain times. But the research I did at the time suggested there had never been a major house price crash in this country. Trouble is, I can’t remember where I did my research.
But I have had another look again today and I have again found strong evidence that, by and large, this country has never had a crash. The following link is to a website that shows historical house prices between 1960 and 2006, albeit Australia wide.
There is a small fall of less than 10% during 1962 and 1963, and another even smaller fall of around 3% in 1967. Other than that, prices go up in every other year. Then there was a massive rise between ’86 and ’89 of over 70% before a less than 2% drop in 1991.
Check out those house prices here.
Hi Bob
In Australia you can not really compare the country as a whole with property prices as the different states tend to even out the drops and rises.
Some states have 14% increases while others with 5% drops in the same year, this is quite common. (ABS Stats 6416.0 – House Price Indexes: Eight Capital Cities, Dec 1993 have a look at Table 2 in more recent years they don’t make it as easy to compare)
I am a bit dubious about stats from a website called retireonproperty.com. I looked at nationwide.co.uk and the figures don’t look that much different if you just compare to individual Australian States ie. Melbourne or Sydney just a bit out of sync.
Hi Jonny
No, I know it’s not ideal to class Australia as one place, but then it’s the same in England. The BBC have a great page on their website and it breaks the UK down into 12 regions. Houses from region to region vary enormously in price as do the yearly fluctuations.
There’s a link to that page in my House Prices Revised post.
But with 8 states here, 12 regions there, what’s a guy to do? So I compare Australia with the UK. Otherwise I’d be up all night designing a matrix and then I’d have to compare a UK region with an Australian state.
And then someone would say ‘you can’t compare NSW with SE England’. See the problem?
As for stats from retireonproperty, they were actually done by REIA, so they should be good.
cheers
Bob
Hi Bob
It was you comment…. “But here, I think stagnation or a few percentage drops in prices is about as bad as it gets.”
That is the statement I didn’t agree with, a lot of people have an unrealistic perception that if they buy a property that is worst that will happen.
It has been a long time since I experienced a large crash but I am debt free now so I have no need to buy and sell, but seeing we have been through probably the biggest property boom in history I would be cautious.
If retireonproperty.com updated their graphs would not look quite so rosy.
I am dubious about REIA data being independent (an independent industry group I don’t think so!).
You also reference RPData which has vested interests in talking up the residential property market. The author of the article you link to, Christopher Joyce, is the owner of Rismark which is “Opening up the residential property asset-class for institutional investors”.
In Oz there is hardly any independent commentary about or analysis about residential property, it is almost all from Banks, Builders or Real Estate Agents (mainly their Industry Groups or others trying to profit from it) the Media just regurgitates as facts.
Keep up the good work with the Blog. Jonny
Hi Jonny
Ah yes, I get you. It’s a very good and valid point, thanks for making it. It also has current relevance following the Brisbane floods. The media are reporting houses affected by those floods may have lost as much as 30% in value.
I think what I have been trying to say, as an Englishman who has lived through two major nationwide property crashes in the UK and only missed the third because I came here, is Australia does not seem to have the same boom and bust cycle that the UK has suffered from for many years.
I got latest figures from the Australian Bureau of Statistics…..
ANNUAL CHANGES (MARCH QUARTER 2009 TO MARCH QUARTER 2010)
* Preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities increased 20.0% in the year to March quarter 2010. This preliminary result is the largest annual increase since the series commenced in March quarter 2002.
* Annually, house prices rose in Melbourne (+27.7%), Sydney (+21.0%), Canberra (+20.6%), Darwin (17.5%), Perth (+15.0%), Hobart (+14.1%), Brisbane (+12.1%), and Adelaide (+10.8%).
Source:
and…..
Annual Changes (March Quarter 2010 to March Quarter 2011)
* Preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities decreased 0.2% in the year to March quarter 2011.
* Annually, house prices increased in Melbourne (+1.1%), Canberra (+1.1%), Adelaide (+0.9%), Sydney (+0.8%), Hobart (+0.6%), and Darwin (+0.5%), and decreased in Brisbane (-3.6%) and Perth (-3.2%).
Source:
Definite evidence of a boom 2009/10 and a slow down now. As the men in suits say, ‘please remember your investment can go down as well as up.’
Sorry Bob,
I can tell you we have had both massive rises, in the mid 2000’s, and massive drops of 30% plus in some areas in the very early 90’s in Australia.
I have lost and made money in both.
No, Australia is not immune to house prices dropping, although it is rare, but there is no history here of boom and bust as it was called in England.
There has never been massive rises, like in the 70s or falls in house prices here as in the 90s in England. Mind you, I think England coped with the latest global financial crisis a little better as I think houses only lost about 20% of value, so maybe they are beginning to get boom and bust under control, who knows?
But here, I think stagnation or a few percentage drops in prices is about as bad as it gets.
Sorry, I have no idea about New Zealand other then we have to find a way to stop them beating us at rugby!
Great article.
So it would seem that Oz is also not immune to the drop in house prices, seen in the UK. Would the fall also highlight the strength or lack of in the Oz economy, for so long seen as outside of the current debt problems?
Any idea how the prices in NZ compare as well?
Keep up the blogging.