Property
Issue No. 32 - December/January
Stable SA market, but shortfalls loom
by Mr Kel Spencer
The increase in house prices in Australia over the past two decades has far outpaced the general rate of inflation, average earnings and household income. On an average annual basis, house prices have increased by 8.3% (REI) compared with an increase of 3.6% in consumer prices - in real terms, an increase of 4.5% after adjustment for inflation.
To put this in perspective, in 1986 it required 2.5 years of average household disposable income to purchase a home: in 2006 that has increased to 5.4 years.
Although established house prices have increased significantly over the past 20 years, the cost of building a new home has increased in line with the rate of inflation. One important implication of the increase in established house prices is the higher cost of land.
Table 1 shows the current percentage of family income required to sustain home loan repayments in the various Australian capital cities.
Source: Advertiser
Australia has three distinct residential markets. At one end there are booming markets in WA and the NT being driven largely by the resource industry, increased employment and strong migration.
There are healthy, stabilised residential markets in Canberra, Tasmania, Victoria, Queensland and SA.
Lastly there is the downturn in markets currently experienced in Sydney, displaying a negative growth period over the past 12 months.
Table 2 shows the three tiers of the Australian residential property market and the median residential price growth over the past 12 months.
Source: Domain.com
Strong growth should continue in 2007 in the resource states but housing conditions across the rest of the nation will remain soft in the higher interest climate.
Sentiment in most states towards housing is caut...
