Australian property market to recover in 5 years: PIPA

May 2020Karen Millers

Although the full impact of Covid-19 is yet to hit the Australian property market, researchers predict the downturn won’t last long.

Once the economy gains momentum, the property market recovery should be swift, a trend often seen in the first five years after a recession according to the Property Investment Professionals of Australia.

PIPA chairman Peter Koulizos analysed data for seven consecutive years including the start of each recession or economic downturn from 1973 to the global financial crisis.

“In fact, looking back over the past nearly 50 years, house prices were higher five years after a recession or downturn each time,” Koulizos said.

“Some locations performed better than others, mostly likely due to local economic factors after each period.

“However, the research shows that talk of impending property ‘doom’ has never happened in recent history–and these recessions or downturns lasted multiple years rather than a few months.”

House prices following a financial crisis

Change in price after five years ending in 1980 1988 1996 2014
Sydney 100.7% 64.1% 16% 39.7%
Melbourne 37.6% 67.7% 3.1% 18.5%
Brisbane 49.7% 20.4% 23.3% 6.9%
Adelaide 37.7% 31.3% 5.9% 7.1%
Perth 64.7% 61.9% 27.3% 11.4%
Hobart 40.2% 51.8% 20.5% 1.7%
Darwin NA NA 47.3% 16.6%
Canberra 33% 20.2% 11.6% 8.3%

Source: PIPA

Koulizos said that over the three most recent economic downturns, there were periods of annual house price falls in many capital cities, but the price reductions were never sustained nor prolonged.

“An interesting point to that is that in 2011, every capital city recorded a fall in its house price index, which was simply when the GFC stimulus money ran out,” Koulizos said.

“This could well become a statistical reality this time around, too, but it’s important to recognise that within either one year or two years of that period, the house price index was showing solid growth once more.”

In 2010 the market was still recovering the global financial crisis but by the end of 2019 dwellings, prices and density had increased dramatically according Propertyology’s latest report.

Residential dwellings increased from 8.8 million to 10.4 million in the decade and 3.7 per cent of all residential dwellings approved were apartments or townhouses, compared to 31 per cent in the previous decade.

“Five out of eight capital cities had more apartments than houses approved during the decade–Canberra 70.9 per cent, Sydney 65.9 per cent, Melbourne 52 per cent, Darwin 51 per cent and Brisbane 50 per cent,” Propertyology head of research Simon Pressley said.

“From the start to the end of the decade, median house prices had increased from $530,00 to $972,000 in Sydney, they declined in Perth $494,000 to $489,000, they almost doubled in the regional township of Goulburn $230,000 to $427,000 and were very consistent in locations like Bendigo $235,000 to $360,000.”

However there was a significant drop in the volume of transactions despite an increase in supply and population growth.

“The 113,126 quarterly average volume of transactions in Australian real estate during the twenty-tens was notably lower than the 125,342 during the previous decade,” Pressley said.

The Propertyology researcher said they would have ordinarily expected a quarterly average in excess of 140,000 transactions however there was a steep decline in sales from the middle of the decade onwards.

“The sharp retraction is a direct result of Australia’s banking regulator [APRA] implementing a series of credit tightening policies,” Pressley said.

“Over time, the lower volumes of transactions for investment properties resulted in a general tightening in residential vacancy rates and rising rents in various parts of Australia.”


Renee McKeown, The Urban Developer, 22 May 2020


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