It’s been awhile since I last talk about Australian house prices and compared them to those in the UK; I’m surely due to do that again, but not now.
When I have talked about it previously, I have suggested that Australia doesn’t really do house price crashes or the “boom and bust” stuff so common in the UK. But someone did point out to me, and correctly too, that whilst prices do not crash nationally (as a rule) there can be some areas that suffer major price falls.
And that’s exactly what they have done in the last year in certain areas. Why? All thanks to the backlash from the Global Financial Crisis (GFC) of 2008 and the flooding we’ve had here lately, and particularly in 2011.
Australia’s worst hit properties.
Top 10 median price drops in percentage terms for 2011
1. North Booval (QLD) -46.3% (houses) to $154,000
2. Mittagong (NSW) -45.1% (units) to $225,000
3. Jolimont (WA) -44.4% (units) to $342,000
4. Carey Bay (NSW) -42.6% (houses) to $266,001
5. St Kilda West (VIC) -41.8% (houses) to $1,455,000
6. Port Augusta (SA) -41.5% (units) to $120,000
7. Golden Beach (VIC) -40.9% (houses) to $85,750
8. Rainbow Beach (QLD) -40.8% (units) to $219,750
9. Acacia Ridge (QLD) -40.8% (units) to $298,500
10. Eagle Farm (QLD) -40.4% (units) to $786,500
Source: RP Data
In a nutshell, the most affluent areas (thanks GFC!) and the wettest areas (thanks floods!) have been the hardest hit, with affluent/wet areas coming off the worst.
RP Data release their latest house price data on a regular basis. At the same time as they were providing the above information, they also announced that across the board in Australia, year-on-year to December 2011, median house prices fell, on average, by 4.8%.
So, as you can see, there are at least 10 areas listed above that can comfortably claim to have suffered a house price crash, yet nationally we are looking at a slide rather than a crash.
By the way, I tried watching RP Data’s latest video about house prices, the presenter spoke of “new indices methodology”….. “an improvement on the previous home value index” …. “using an adjacent period hedonic regression method” … “using new imputation techniques”….. No wonder nobody trusts them!
Will Australian house prices crash?
Some say we may be looking at a gentle fall in prices that could last 10 years, which is the equivalent of a very slow “crash”.
Others say we are teetering on the edge of a major crash, and last year’s slide is just the start.
Then there are those who say simply what is best for them. Those selling newspapers say crash! Those selling houses can already see glimpses of a recovery.
Me, I have no idea, but I will say this.
Prices around here do seem to have dropped by much more than the 4.8% suggested nationally, or the 7.6% (RP Data) attributed to Brisbane. And I’m not talking about affluent or wet areas; I’m talking about houses outside of both of these zones.
It feels more like 15% to 20%, it’s a buyer’s market, and there are “bargains” to be had. Possibly, that is, it depends what happens next. And I don’t think anybody really knows.
Here’s what the ABS has said about house prices since the year I arrived in Australia.
- 2007 +12.3%
- 2008 – 3.3%
- 2009 +13.6%
- 2010 + 5.8%
- 2011 – 4.8%
- 2012 ?
- Total +23.6%
And secondly, where I live, Brisbane:
- 2007 +21.6%
- 2008 – 1.4%
- 2009 +10.9%
- 2010 + 0.7%
- 2011 – 6.7%
- 2012 ?
- Total +25.1%
Given that interest rates here have averaged out at something like 5% to 7% over the same term, housing has not been a fantastic investment. Especially not for me, because I arrived in November 2007, so I missed the biggest rises when I bought my house.
It will be interesting to see where prices go in 2012.