As Australia technically faces a per capita recession, there are some markets that are still seeing property prices rise. Here’s why.
Despite economic downturns portraying an environment where everything is in decline, research from Propertyology explains why some property markets can still defy these negative expectations.
According to head of research Simon Pressley, some markets rose as high as 20 per cent during the last actual national recession during 1990 to 1991 and the global financial crisis (GFC).
“For as far back as property data takes us, there’s never been a single year when property markets didn’t do well in many locations – never,” Mr Pressley said.
Since 1985, Mr Pressley added that every state and territory has seen a technical recession at least three times, but property prices have not underperformed.
In fact, property in NSW has been relatively successful despite facing four recessions.
“While we all remember Sydney’s 2013-2017 property boom where property prices increased by 70 per cent, most have forgotten that New South Wales’ economy produced three out of four quarters of declining GDP in 2012-13,” Mr Pressley said.
Despite facing a recession, property prices were relatively stable in most of the capital cities, seeing mild growth in Sydney at 0.7 of a percentage point, Melbourne at 2.3 per cent, Hobart at 4.3 per cent and Brisbane at 6.3 per cent.at 1 per cent,
Regional areas, however, saw stronger growth during this time, with Rockhampton and Shoalhaven both up 20 per cent, Goodiwindi at 19 per cent, Kempsey at 18 per cent, Newcastle and Mackay both at 17 per cent, Tamworth at 15 per cent, and Toowoomba, Margaret River, Wagga Wagga and Hervey Bay all rising 12 per cent.
“The moral of the story is that while a broad downturn on the nation’s economy generally does drag on the overall rate of property price growth, that doesn’t mean that property prices everywhere decline in value,” Mr Pressley said.
“There are multiple factors which affect property prices, including the fact that each individual city has its own unique economic characteristics, different levels of housing affordability, varying levels of housing supply, and a wide range of other local factors that influence buyer behaviour.”
Even though the GFC hit the global economy, Australian median house prices were increased in nearly every capital city the year after, with the exception of Perth’s 1.6 per cent decline.
This was largely in part due to the federal government’s $50 billion stimulus package, which flowed through to supporting real estate.
Jumping forward to 2010, the majority of the capitals were seeing growth of between 5 to 12 per cent.
“The real property market downturn directly caused by the GFC was not seen until after the stimulus package wore off,” he said.
“Described by some as the biggest global economic downturn in the history of mankind, the cumulative decline in median house prices during 2011 and 2012 was less than 15 per cent.
“Some capital city property markets subsequently rebounded strongly as did markets in various non-capital locations.”
Despite the prospects of a technical recession hanging over the economy, Mr Pressley said this did not mean that the nation’s economy and property prices were set for trouble any time soon.
As Australia simply is not one single property market, each state and territory has its own quirks that contribute to the national economy, with some operating more favourably than others.
“A nation that doesn’t make a profit for a couple of quarters doesn’t necessarily mean it’s in tatters any more than a solid company having one lean year,” Mr Pressley said.
“The performance of the individual economies of each Australian city and town will always be more relevant to individual property market performance than the broader set of national accounts.
“Decades of factual property market results have taught us that.”