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Property Prices Have Grown at the Third-Fastest Rate Since 1880

The extraordinary growth in property prices during 2021 has been one of the strongest booms in Australian history.

Capital city house prices grew 22% (in inflation-adjusted terms) in the year to September, according to PropTrack. “This is the third-fastest episode of house price growth in Australia’s history,” PropTrack’s research has found.

As the chart below shows, the biggest annual increase occurred in 1950, when prices jumped 111%, followed by 1989, when prices increased 29%.

(The remarkable result in 1950 was due to the removal of price controls that had been introduced during the Second World War. Price controls artificially depressed prices by limiting the amount for which people could sell their homes. When price controls were lifted, a surge of catch-up growth occurred.)

Sydney house prices have jumped $360k in one year

Focusing just on Sydney, both the short-term and long-term numbers tell a remarkable story.

Between November 2020 and November 2021, Sydney’s median house price grew from $1.00 million to $1.36 million, according to CoreLogic.

If we go back half a century, to 1970, Sydney’s median house price was $18,700, according to Applied Economics.

So while the boom over the past year has been extraordinary, property has also performed strongly over the long-term.

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The 4 reasons why the property market has been booming

Returning to the present, you might be wondering: why have property prices been growing so strongly?

There are four main reasons.

First, interest rates have never been lower. During the course of 2020, the Reserve Bank of Australia reduced the cash rate from 0.75% to a record-low 0.10%, which prompted banks to make significant cuts to their mortgage rates. Lower interest rates have made it easier for buyers to repay mortgages, prompting them to bid up prices.

Second, state and federal governments responded to the pandemic with a range of property stimulus measures, such as the HomeBuilder scheme (which ended in April), stamp duty exemptions and buyer grants. Those stimulus measures have also stoked demand.

Third, consumers responded to the pandemic by saving much more of their salaries. In the September 2019 quarter (before covid), households saved only 4.8% of their income, but by the September 2021 quarter, that had jumped to 19.8%, according to the Australian Bureau of Statistics. With all these extra savings, more people have been able to enter the property market, which has further increased demand.

Fourth, while demand has gone up, supply has gone down. Between October 2020 and October 2021, the total number of for-sale properties fell 22.2% across Australia and 14.3% in Sydney, according to SQM Research. So more buyers have been competing harder for fewer properties.

Why it’s so important to get a pre-approval

When prices are falling, buyers have all the power. But when prices are rising fast – like in the current market – sellers have the upper hand.

Vendors are receiving lots of offers right now, many of which are from buyers who have finance organised. So if you make a bid but don’t have a home loan pre-approval, vendors are likely to reject your offer in favour of one from a qualified buyer. That’s why it’s so important you get a pre-approval with a Shore Financial mortgage broker before you start searching for your next property.

Another benefit of getting a pre-approval is you know how much you can spend.

Shore Financial can help you find a loan that suits your personal circumstances.

Your Shore Financial broker will take the time to understand your personal circumstances and financial goals, and will then recommend a loan product and loan structure that suits your needs. Our brokers work with a large, diverse panel of lenders – from the big four banks and large regional banks to credit unions and non-bank lenders – so they can compare an enormous amount of loan products for you.

To discuss your options, you can call us on 1300 416 700, email us on info@shorefinancial.come.au or fill in this online form.






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