Rising House Prices
All capital cities, with the exception of Sydney, have exhibited strongly increasing prices since about 1998-9. Sydney house prices increased from $573,000 to $671,500 (+17%) between 2003 and 2010 while other capitals have roughly doubled in price since 2003.
The 'Housing Affordability in Australia - Good house is hard to find' report stated that "the average house price in the capital cities is now equivalent to over seven years of average earnings; up from three in the 1950s to the early 1980s." Some factors that may have contributed to the increase in prices are;
- Loosening of credit standards (Loan to Value Ratios LVR of 95% still available)
- Low interest rates from 2008 onwards (increasing borrowing capacity)
- Limited government release of new land (reducing supply)
- The average floor area of new houses increasing by up to 53.8% in the 18 years from 1984-85 to 2002-03
- A tax system that favours investors and existing home owners.
- Limited stock - there appear to be lower levels of existing property sales in 2009/2010 as compared to previous years, reducing supply.
- Government restrictions on the use of land preventing higher density land use.
- High population growth (now about double the world average - see Population growth rates chart).
- 2008 foreign investment rule changes for temporary visa holders
- Unregulated property investment seminars promoting the purchase of investment properties
- speculative demand for housing due to a public perception of real estate as a sure bet.
These factors are stated to have increased property prices in Australia. Any one of these factors in isolation would be unable to provide the framework for the asset inflation now evident.
Read more about this topic: Australian Property Bubble
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