INTHEBLACK September 2021 - Magazine - Page 45
AT A G L A N C E
At the start of the pandemic,
some industry insiders predicted a
30 per cent decline in house prices
in Australia over a 12-month period.
Instead, house prices have been
increasing at the fastest rate in
32 years, rising by 2.8 per cent
in March 2021 alone.
The resilience of the property
market is caused by a number
of factors including stimulus
measures, constrained
consumption and investment
choices, and low interest rates.
STORY JOHANNA LEGGATT
F
or almost two decades, the unstoppable march
of the residential market has been one of the
dominant narratives of the Australian property
sector. It is an enduring story of smashed
sales records, desperate first home buyers and packed
crowds at auctions, fearful of missing the boat.
Then the pandemic hit, and it seemed that the run
was over. Last year, many property analysts warned
of doom and gloom, with some industry insiders
predicting a worst-case scenario of a 30 per cent
decline in house prices over a 12-month period.
However, Dr Cameron Murray, an independent
economist and post-doctoral fellow at the University
of Sydney’s Henry Halloran Trust, saw the situation
differently.
In May last year, Murray argued the case for a bull
property market, and said the housing market was
far more likely to boom than crash in the aftermath
of lockdowns.
When he posted a link to his argument on Twitter,
the backlash was severe.
“People thought I was insane,” Murray says. “I have
since reminded people quite a few times to check out
the response to this tweet a year ago.”
Nowadays, Murray feels vindicated. According
to property data analyst CoreLogic, Australian
housing prices have been increasing at the fastest
pace in 32 years, rising by 2.8 per cent in March
2021 alone. Between January and April 2021,
Sydney’s median house price rose by A$100,000.
THE PERFECT STORM
Why is the Australian property market showing
such remarkable resilience?
Murray says we need to cast our minds back to
three years prior to the pandemic, when the Australian
property market experienced a large price adjustment.
“You don’t usually get crashes after three years
of nothing. You get crashes after three years of
unbelievable price growth,” he notes.
It also helps to think of the Australian housing
sector as part of a broader global market that has
also seen price rises in the past year.
Murray points out that, in the US state of
Arizona, prices rose by 30 per cent over the course
of this year, while Auckland has seen a more than
20 per cent rise in housing prices. There have been
steady rises in Europe as well, particularly
in Germany and Denmark.
“It’s important to remember that it is very hard for
[Australia] to just crash all on our own,” Murray says.
Another contributing factor in Australia has been
historically low interest rates, which makes money
cheap to borrow. Consumers’ spending options
have also been limited by restricted choices – no
international holidays, no music concerts or theatre
performances, no going out to bars and restaurants. At
the same time, individuals also increased their savings
due to concerns around their job safety and businesses.
“I think we also forget that Australia had an
outsized stimulus last year,” Murray says. “I calculated
it was five times bigger than the post-GFC stimulus
in terms of cash payments to households.
“Now everybody is a bit cashed up. We can see more
people competing at those higher prices for property
because they can borrow at low interest rates.”
DO PRICES NEED TO DROP?
Many experts argue that something needs to be done
to make property more affordable and accessible for
lower and middle-income households.
Dr Andrea Sharam, senior lecturer with the School
of Property, Construction and Project Management at
RMIT University, highlights the inherent conflict in
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