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Australian Real Estate PricesSince the mid 1990s, the median real estate price in Australia has risen by 180 per cent, compared with an increase of a little over 30 per cent in the Consumer price index. This real increase in real estate prices can be seen in the orange line in the chart below. You can see that the rise in real estate price s has been much faster than that in construction costs, so the implication is that most of the increase in real estate price s has been due to increases in the price of land.
Researching real estate prices in Australia by cityThe following chart gives report on changes in real estate prices in cities in Australia since the December quarter 1995 till 2007.
Australian real estate price city and country areas comparisonBelow is chart comparing the nominal rise in prices comparing city or suburban areas compared to country areas.
Researching international real estate pricesThe increase in real estate prices in Australia since the mid 1990s, while very large, has been This suggests that the main forces that have underpinned this rise have been global in nature, rather than country-specific. Below chart shows that Australia has not been alone in experiencing this rapid rise in real estate prices. With very few exceptions, most developed countries have experienced a doubling or trebling of real estate prices since the mid 1990s.
Contributing factors to rising Australian real estate pricesTwo common elements in the countries that experienced rapid real estate price increases were increased the access of households to finance, and relatively low interest rates,which reduced the cost of finance. The latter is true not only for the official interest rates set by central banks, but for longer-term rates set in capital markets. While there has been much discussion about the causes of the low long-term interest rates, With the amount of money that people wanted to save running ahead of the amount that people wanted to invest in physical assets, there was a strong incentive for the financial sector to find ways to issue more financial claims against the stock of existing investment. All of this is of course, is a recipe for rising asset prices. The widespread nature of the increases in real estate prices, which as noted,have encompassed most major countries and virtually all parts of Australia, makes it hard to attribute them only to factors which have localised effect – e.g. land usage policies, taxes and transport arrangements. A big part of the increases over time is due to factors affecting demand and capacity to pay, such as increased household access to finance. There are many considerations likely to affect real estate prices in Australia. We credit the source for a lot of the comments here from Deputy Governor of Reserve Bank of Austraila : Ric Battellino comments on real estate and housing affordability. |
