Home values increased substantially more than unit value in most regions.
“The majority [cities] they were seeing 5-6 percent annual growth rate,” Lawless said, adding that this dispelled the long-standing real estate myth that property prices doubled every 10 years.
There have been six cycles of price growth and price decline in the national index over three decades, Lawless said, depending on fiscal policy, monetary policy decisions, economic crises, fiscal stimulus and broader economic conditions. There were also substantial differences between the regions.
Melbourne’s Yarra Statistical Region, which encompasses suburbs such as Fitzroy, Carlton North and Richmond, posted the strongest growth, with values up 779 per cent. It was followed by the city of Melbourne (760 per cent), the Gungahlin region in the ACT (754 per cent) and the Boroondara (734 per cent) and Maribyrnong (710 per cent) regions of Melbourne.
Sales agent Nick West, director of Nelson Alexander, said the demographics of areas like Fitzroy and Carlton North had changed during its 33 years in business. A sharp rise in downsizing moving to the area and more young families staying there increased buyer demand.
“There is no question that the Baby Boomer demographic has contributed to price growth, and many were going down … and could spend 10 to 20 percent more to secure the right home,” he said.
More home renovations over the decades and the gentrification of high streets had also affected prices.
Areas of Sydney’s eastern suburbs and inner west, and inner Brisbane also made the top 20.
Inland and coastal suburbs had by far the most growth, Lawless said. While the premium market led the ups and downs of the market, upscale properties tended to have stronger growth over time.
Going forward, he expected price declines to level off as interest rates peak and then rise as rates are lowered. He noted that the longest recession in the capitals combined since the early 1980s lasted 21 months.
Forecasting how the market will perform over the next decade would be an exercise in futility, he added. While average annual growth of 5 to 6 percent could continue, there could be significant volatility.
AMP Capital Chief Economist Dr. Shane Oliver said market downturns over the 30-year period had largely been short and mild: price declines of less than 10 per cent. Prices then quickly rebounded as interest rates generally resumed their long-term downward trend, while demand was buoyed by strong population growth since the mid-2000s.
“I suspect this time it may be a little different,” Oliver said. “It will take more time for prices to reach new all-time highs again and recover from the drop that we are seeing now.
“We are looking at a cyclical downturn that is compounded by the likely end of the long-term recovery that has been underway for much of the last 30 years, leading to a deeper recession and slower recovery.”
Oliver expected slower price gains over the next decade as the cash rate and fixed mortgage rates were unlikely to return to the lows that fueled price growth. Very high debt-to-income and price-to-income ratios, bank regulators’ increasing focus on risky lending, and community concerns about poor affordability, could also limit price growth more than in previous cycles.
Oliver has forecast that property prices in the capital city will fall 15 to 20 percent from peak to trough, assuming the cash rate rises to 2.6 percent. So prices could start to recover in the second half of next year, when the Reserve Bank could try to cut rates. However, if rates were to rise further, there could be further price declines.