Aussie house prices ~5% below peak following CPI

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By Leith van Onselen

RP Data’s Cameron Kusher has produced an interesting post this afternoon on Australian housing values in the wake of today’s December quarter CPI release from the ABS:

The raw capital growth figures show that combined capital city home values at the end of 2013 were 3.5% higher than at their previous peak.  When these figures are adjusted for inflation, values are still -4.6% lower than their previous peak at the end of the September quarter in 2010.

Chart 3

Across each individual capital city market, inflation adjusted home values remain below their previous peak.  This includes Sydney and Perth where unadjusted figures show values are 10.9% and 3.6% higher than their previous peak respectively.  When adjusted for inflation, values across these two cities are currently -0.1% lower than their previous peak and Perth values are -8.9% lower.

RP Data’s assertion that Australian housing is nearly 5% below peak in real inflation-adjusted terms is supported by the RBA’s dwelling assets data, which was around 7% below its 2010 peak when measured against GDP as at September 2013 (see next chart).

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Incidentally, it’s a similar story across the pond, with New Zealand housing values around 4% below their 2007 peak when measured against GDP (see next chart).

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20 Responses to “ “Aussie house prices ~5% below peak following CPI”

  1. The Patrician says:

    By George, he’s right! House prices aren’t really that high at all.

    We’ve all been imagining it.

  2. KeenEyeKen says:

    I’m not sure I agree with deflating house prices by CPI.

    I would think that using either the ABS’s wage price index, average weekly earnings or maybe total employee remuneration would be a better measure…

    each of these grow quicker than CPI, so would mean we’re even further off the peaks than the above analysis would suggest

    One could also use the GDP deflator, which could then be compared with the wage series mentioned above and the difference between them could be a proxy for the impact of population growth on house prices…

    that’s something to do for someone with more time on their hands than myself :)

  3. Piper says:

    Holy Moley!… Let me at them cheap houses…

    One has to be a couple of sandwiches short to believe this drivel…

  4. adoxographer says:

    If you have leverage up to your eyeballs like so many people do, nominal appreciation is all that matters.

    • Explorer says:


      Inflation in nominal prices and low interest rates is generally great for highly leveraged people.

      The increase in net equity for somone who bought with a 5% deposit in Sydney is in the order of 200%( ignoring interest vs rent and transaction costs), which make little difference over quite short periods of high nominal growth (eg 1 or 2 years).

      Peolpe who bought in sydney during the height of “Don’t buy now” say 12 months ago are laughing! Sure, one day they might not be but maybe they will be laughing twice as hard in another year.

      Everything has risk and uncertainty, including not buying.

      • adoxographer says:

        You may have misconstrued my comment as a justification for being long property. I still think history will judge buying in at the top of a 30 year bull market as one of the worst decisions of all time.

  5. MickyG says:

    Two points:

    1. House prices are cheaper in real terms than they were in 2010.

    2. House prices remain ridiculously expensive.

    These statements are both true. No need for outrage.

    • gonderb says:

      And in Sydney, house prices are cheaper in CPI adjusted/real terms than they were in 2004 (just).

      In wage adjusted terms they still have quite a way to go before matching that previous peak.

  6. Monkey says:

    Apologies in advance for an off topic post. This is about ACT land supply. Macrobusiness has observed that the ACT Land Development Agency recently announced that it would cease releasing land to developers and would instead sell individual lots to builders. This left a lot of us wondering why and suspecting something fishy was going on. I’ve done some research which shows that this was done to maximise stamp duty.

    Two points to being with. The higher the sale price for a property the higher the stamp duty. The sooner a property is sold the sooner the Government gets the stamp duty. A third point, each transfer is taxable so the more transfers the better.

    In the past, the LDA has released land to developers in a way that means the developer does the basic development, then the lots are sold to buyers with two contracts: one between the buyer and the LDA for the land and one between the buyer and the developer for the construction of a house off the plan. The suburb of Crace is being developed in his way. The ACT government charged stamp duty on the value of the combined transaction.

    In 2013 the ACT Civil and Administrative tribunal ruled that the ACT government could only charge stamp duty on the land sale contract. This reduced the stamp duty from $16,800 to $20. Stamp duty was not payable on the separate contract with the developer because it was a contract for the construction of a building which was yet to be built. A couple of weeks ago the ACT Court of Appeal rejected an appeal by the government ( and The ACT government lost badly and will have to refund millions of dollars of stamp duty.

    Keep in mind that the average person who buys a house from a developer holds the property for several years or even decades. That $20 of stamp duty is all the Government gets for a very long time.

    Just after this decision the LDA changed its policy. It will now sell individual lots directly to builders. That’s the $20 stamp duty. But it’s not the end of the story. The builder-purchaser will construct a house and will then sell the house and land to a home-buyer or investor about six months to a year later. This is when the ACT government extracts the extra $16,800 in stamp duty because the second transfer is one contract between the builder and the buyer for both the house and land combined.

    The total difference to revenue for the ACT government is huge. The LDA said it will release 2500 sites by mid year. If it only got $20 in stamp duty that would be $50,000. By forcing a second transfer which can be taxed at $16,800 the government gets an additional $42 million in stamp duty six to twelve months later.

    This is not about protecting small and medium builders as the LDA claimed. It’s a cynical exercise is maximising stamp duty.

    • hzhousewife says:


      would the Canberra Times publish this !!

    • Slambo says:

      Excellent work Monkey.

      Surprised? Not.

    • Gunnamatta says:

      Good pickup chief.

      Australian politics is festooned with cretins wanting to hold people to ransom.

      ALP or LNP is basically like going to a pub for a counter meal and having a choice between Parmigiana chips and salad and Schnitzel chips and salad with an optional ham and salsa sauce.

      Its time to plant some change in the system.

    • dumpling says:

      “This is not about protecting small and medium builders as the LDA claimed. It’s a cynical exercise is maximising stamp duty”

      That’s right. State governments have vested interest in maintaining high house prices.

      The prevalent entitlement culture means that the taxpayers demand ever increasing services with lower taxes, and the only way to increase revenues without being seen to introduce new taxes is …….

      I have been wondering when they are going to run an ad along the lines of “transact five properties in a financial year and get the sixth transaction stamp duty free!”

    • The Patrician says:

      Thanks Monkey

      There are still some major missing pieces to this puzzle.

      What are the numbers? What are the potential financial consequences of the Araghi decision to the LDA/ACT. Has the ACCC approved their decision to monopolise ACT residential land development?

      Dawes and Barr need to answer these questions asap and explain exactly what they are doing and why. All the books of the LDA need to be opened to public scrutiny. The ACT auditor general needs to do a full audit asap if not a full blown inquiry.

      I cannot believe there are not senior investigative journalists all over this.

      Speaking of Mr Dawes, he released this soft little LDA PR piece over the weekend to keep the masses distracted with pretty sat pics of 20yrs of Canberra res development and lots of fluff

      Something smells here
      Send in the auditors.

    • Explorer says:

      Well done! Thanks.

  7. Janet says:

    As adoxographer points put, people don’t buy property in real terms, they buy them in the only measure that matters to them – nominally. Reality only has merit to them in terms of ‘inflation will pay off my debt’. That, in a possible deflationary environment, could prove disastrous for them.

    • Bakunin says:

      Janet, you’re right, inflation can really eat into your debt like it did in the 80s when it probably halved the value of mortgages; mortgage holders were made to sweat out 18% mortgage rates though. It only lasted for a short time but if you got through that you did very well.