‘Craziest’ market in 30 years: the impact of the global housing boom

The eastern Melbourne suburb of Hawthorn is home to some of the nation’s wealthiest residents.

They need to be. The median price for a house in this exclusive enclave is now $2.6 million, having jumped by $200,000 over the past 12 months on CoreLogic figures. Almost all of the homes sold this year in the suburb have achieved seven-figure price tags.

Hawthorn is also the home of federal Treasurer Josh Frydenberg, his wife Amie and their two young children. Pressed this week on whether his children would ever be able to afford to live nearby in their own homes, the usually confident Treasurer could not quite answer.

“We have seen a rise in housing prices but I think that the measures that we have introduced will enable more first-home buyers to get in the market,” he said.

“Obviously, there is both a supply and demand side to this equation. We don’t have the levers … around supply as much as the states do, in terms of land release. But yes, house prices have got up.” He added household assets were five times higher than household debt, ensuring homeowners had the capacity to meet their loan obligations and low interest rates were helping more people get into the market.

CoreLogic data this week confirmed what anyone who owns a home or has endured a Saturday auction already knew – the national property market is on fire.

House values in Sydney jumped 3.5 per cent in May to be 15.1 per cent up since the start of the year. Only the Canadian Pacific coast city of Vancouver has experienced a sharper rise.

It’s barely different in Melbourne, where values lifted another 2.2 per cent last month to be 9.4 per cent up since January 1. Sydney’s median value is now just shy of $1.2 million, climbing by $1220 a day. Melbourne is at $908,000, inching up $770 a day.

That’s just the nation’s two largest property markets. Smaller capitals such as Hobart, Darwin and Canberra have seen an increase in values of more than 11 per cent this year. Darwin values alone are up more than 21 per cent over the past year. Dwelling values have also soared in tree-change country towns and sea-change bolt holes.

While the immediate focus has been on the past year, the last decade illustrates the growing wealth gap between those with a home and those without.

Data compiled by Domain shows that in 2011, about 15.5 per cent of all Sydney homes that year exchanged hands for at least $1 million. So far this year, almost 52 per cent of homes sold in Sydney exceeded the $1 million mark. It’s a similar story in Melbourne, where a decade ago about 10 per cent of homes went for $1 million. So far this year, it’s almost a third.

A global phenomenon

It’s not only Australian home buyers facing a tough market. Property prices around the world are surging on the back of ultra-cheap interest rates and stimulus measures put in place to deal with the coronavirus pandemic.

In the United States, prices have climbed 13.2 per cent in the 12 months to the end of March. The Arizona capital, Phoenix, is leading the way with prices there up by 20 per cent. On the Pacific coast, San Diego prices have jumped by 19.1 per cent.

To the north, prices across Canada jumped 23.1 per cent in the 12 months to the end of April. From Quebec (20.1 per cent) to Vancouver (22.1 per cent), prices are on a tear.

In Britain, it is the regions that are taking off. Prices in Yorkshire (up 14 per cent) and across the north-east (up 13.7 per cent) are soaring compared to London, where they have lifted by a comparatively modest 3.7 per cent.

New Zealand has seen price rises that would make a real estate agent blush. Across a string of provincial areas such as Gisborne, Napier and Palmerston, values have jumped more than 30 per cent over the past year. In the capital Wellington, values have lifted by 23.7 per cent while in the nation’s largest city, Auckland, they have jumped 15.6 per cent.

The explosion in worldwide home prices has rekindled the debate about housing affordability and the potential long-term generational damage.

Australia went into COVID-19 with some of the most expensive capital city dwelling prices in the world and there were already concerns about how low and middle-income earners as well as younger people would be able to buy without relying on the bank of mum and dad. Sydney’s median house price was almost 12 times the median household income while in Melbourne it was close to 10 times. In the late 1990s, they were less than half that.