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Pain of recession not lasting for property prices

Pain of recession not lasting for property prices
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Australian home values have been historically resilient despite significant economic headwinds. Photo: Shutterstock

Pain of recession not lasting for property prices

Home values have historically bounced back strongly following recessions, with new analysis from the Property Investment Professionals of Australia likely to provide significant comfort for investors.

Home values have historically bounced back strongly following recessions, with new analysis from the Property Investment Professionals of Australia likely to provide significant comfort for investors.

In some cases. median house prices increased by as much as 100 per cent in the five years following the most recent recessions in Australia, according to PIPA’s research.

PIPA chairman Peter Koulizos analysed annual median house price data for seven consecutive years including the start of each recession or downturn from 1973 to the GFC.

The data showed capital city house prices often increased significantly following an economic downturn.

“In fact, looking back over the past nearly 50 years, house prices were higher five years after a recession or downturn each time,” Mr Koulizos said.

“Some locations performed better than others, most likely due to local economic factors after each period.

“However, the research shows that talk of impending property doom has never happened in recent history - and these recessions lasted multiple years rather than a few months.”

5 years
ending
Sydney
%
Melbourne
%
Brisbane
%
Adelaide
%
Perth
%
Hobart
%
Darwin
%
Canberra
%
1980 100.7 37.6 49.7 37.7 64.7 40.2 n/a 33.0
1988 64.1 67.7 20.4 31.3 61.9 51.8 n/a 20.2
1996 16.0 3.1 23.3 5.9 27.3 20.5 47.3 11.6
2014 39.7 18.5 6.9 7.1 11.4 1.7 16.6 8.3
PIPA's research showed property prices rebounding strongly after recessions. Source: PIPA.

In Sydney, median house prices increased by 100.7 per cent in the five years following the 1973 to 1975 recession, to be the best performing capital city, Mr Koulizos said.

Following the 1983 downturn, Melbourne emerged as the leading capital, with median house price growth of 67.7 per cent in the five years to the end of 1988.

“When it came to the ‘recession we had to have’, Darwin produced median house price growth of 47.3 per cent in the following five years, with Perth the second-place getter.”

Mr Kouzoulis said while there were periods of median house price falls in many capital cities following historical downturns, the price reductions were not sustained.

“An interesting point to that is that in 2011, every capital city recorded a fall in its house price index, which was simply when the GFC stimulus money ran out,” he said.

“This could well become a statistical reality this time around, too, but it’s important to recognise that within either one year or two of that period, the house price index was showing solid growth once more.

“The moral of the story is don’t panic. Property has shown its resilience through economic shocks before and we have no reason to expect it won’t do so again.”

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