THE AUSTRALIAN PROPERTY MARKET: HISTORICAL DIPS IN CONTEXT

It feels like we are in a time of flux right now. A look back in time will help to put everything in context.

If we step back to the years 2000–2026, it’s not that Australian property never falls. It does. The striking thing is that the falls have generally been interruptions in a much larger upward trend. [before anyone chimes in about super high interest rates of 1989/1990, take a deep breath, we’re not going there, that was a long time ago]

There is an important caveat in these ups and downs: Australia doesn't have one perfectly uniform property market. Sydney can be falling while Perth is booming, and vice versa. So for the broad historical picture, I'll use national dwelling values / capital-city measures…it’s a big country.

MAJOR SETBACKS SINCE 2000:

2003-2006, Peak to Trough fall of ~10% which recovered in 2-3 years…what was happening? A Post-Boom Correction (boom brought on by Howards’ tax concessions which affected the next 26 years, deeply - see last week’s Property Pulse).

2008-2009, Peak to Trough fall of ~5%-8% which recovered in 1 year…what was happening? Only the Global Financial Crisis (shit, it felt a lot more serious than that, but the numbers don’t lie. This is a deeper story about Watching the News).

2010-2012, Peak to Trough fall of ~5%-7%, which recovered in 1-2 years…what was happening? Rate rises and the end of a mining boom cycle (I know some people who invested in mining towns and got burned - I invested in mining penny stocks and got burned).

2017-2019, Peak to Trough fall of 10%, which recovered in 4-5 years…what happened? Credit tightening and extra lending restrictions (goes to show that an economic correction or a credit crunch can have a bigger effect than one single “event” like the GFC or…COVID).

2020 COVID, Peak to Trough fall of 2.1%, recovered in only 6 months. This shock, as we all know, did not last and by 2021, the crazy COVID BOOM caused prices to rise by 25%.

That is the Australian property market in miniature. A setback doesn't necessarily change the underlying direction.

Since the COVID shock/boom, there have been a series of rapid rate rises and now the changes to tax policy, which, if the past 26 years tells us anything, will have more of an effect on the market than any 1 event.

Historically, Australian property has repeatedly experienced corrections which have generally been temporary setbacks within a much longer upward trend. Right now, I suspect that property prices will drop ~10%-%14 and then flatten out for a period before rebounding.

Because of the wild property prices we are facing, paired with the fact that real wage growth has not kept up and the high cost of living, I wonder if the Australians are all tapped out? How much bounce do these property prices have in them? I think Wait & See.